Case 6:21-cv-00916-ADA Document 43-8 Filed 04/19/22 Page 1 of 2
`Case 6:21-cv-00916-ADA Document 43-8 Filed 04/19/22 Page 1 of 2
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`EXHIBIT 8
`EXHIBIT 8
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`Case 6:21-cv-00916-ADA Document 43-8 Filed 04/19/22 Page 2 of 2
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`Shopping without cash: The emergence of the e-purse
`
`Carol L. Clark
`
`Introduction and summary
`During the 1990s, some payment analysts suggested
`that smart cards' with e-purse applications could be a
`promising new payment option for certain types of trans-
`actions. An e-purse is a stored-value payment device
`that offers the following features to the consumer: It
`holds electronic monetary value that substitutes for
`cash; it does not require online authorization; it records
`the value of each purchase on the card rather than a
`central computer server; and it can be exchanged for
`goods and services from various merchants. The de-
`vice is generally stored on a computer chip, which can
`reside on any one of a number of items most consumers
`already carry, such as a payment card, mobile phone,
`key chain, or even a watch. When the consumer makes
`a purchase, monetary value is deducted from the mi-
`crochip on the card.
`The key difference between a stored-value smart
`card and debit, credit, payroll, and gift cards is that
`value is stored directly on the smart card rather than
`stored in an account on a central computer server, and
`therefore, transactions are processed offline between
`the smart card and the card reader at the point of sale
`(POS). In contrast, debit, credit, payroll, and gift cards
`in the United States are offered on magnetic stripe
`cards, and payment involves an online authorization
`that requires a real-time connection with a central com-
`puter. The purchase is approved or declined through
`the authorization process, which checks whether there
`is sufficient value in the account for debit, payroll,
`and gift card transactions and whether the credit limit
`has not been exceeded for credit card transactions.
`The authorization process may also check whether
`the card is fraudulent or stolen.
`Some payment analysts predicted that smart cards
`could lead to a cashless society, one in which e-purs-
`es would replace cash and coins for low-value pay-
`ments. As we know, this hasn't happened. Although
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`a number of e-purse programs have been implement-
`ed around the world, these programs have experienced
`varying degrees of success, and many have failed out-
`right. Smart card adoption in the United States has been
`slower than in the rest of the world. Many analysts argue
`that this is partly because the U.S. already has an ad-
`vanced telecommunications infrastructure that can
`verify magnetic stripe card transactions quickly and
`cheaply online. This results in relatively low fraud
`levels and relatively high levels of satisfaction among
`businesses and consumers with the current systems.
`If this is true, then smart card applications may offer
`more value in other parts of the world with less highly
`developed telecommunications infrastructures and high-
`er incidences of fraud in existing payments networks.
`In this article, I review six e-purse smart card
`programs in Hong Kong (one) and the United States
`(five). I chose these two regions because Hong Kong
`has one of the most highly successful e-purse programs,
`the Octopus card, and the United States has imple-
`mented a number of e-purse programs, some of which
`have been more widely adopted than others. I find
`that the most successful among these programs tend
`to have the following characteristics: a captive audi-
`ence that drives critical mass, such as those found in
`the transportation industry or government sector; an
`affordable cost structure relative to other payment in-
`struments; compelling incentives to consumers and
`merchants; and a technology that is well tested and
`addresses standards issues before the rollout.
`
`Carol L. Clark is a payments research manager at the
`Federal Reserve Bank of Chicago. The author gratefully
`acknowledges the assistance of Erin Davis, Juan A. De
`Jesus, David Doyle, Tamara Kidder, Graham Mackenzie,
`John Scaggs, Barbara Straw, Eric Tat, and Joey Wong in
`the completion of this study and the helpful comments on
`previous drafts by Sujit Chakravorti, Geoffrey Gerdes,
`Richard Porter, Tara Rice, and Leo Van Hove.
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