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Citigroup Inc. revealed on Tuesday it will start a pilot next month for a new type of credit card that will let cardholders apply rewards they’ve earned by pressing a button on the card. The pilot for the new card, which Citi has dubbed its 2G credit card, will start out with more than 100 users and will add more participants starting early next year, according to Terry O’Neil, executive vice president of Citi’s North American Credit Card Division. He says the bank will likely roll out the technology some time late in 2011.
For the pilot, Citi will invite a “random sample” of rewards participants in its cardholder base from across the country, O’Neil says. The project will allow the New York banking giant to better understand “how customers interact with the technology, how they use it,” O’Neil says. It will also help Citi determine such questions as how rewards should be distributed at the time of the transaction, he adds. As to whether the card might ultimately carry a fee to cardholders, O’Neil says it’s too soon to say. “We’re exploring all those questions for the pilot,” he says. “We have no point of view on that now.”
The card, which relies on technology from a Pittsburgh-based startup called Dynamics Inc., carries an embedded chip and a battery but is no larger or thicker than a standard credit card. This will allow the card to work with any point-of-sale device that swipes cards. “We saw that as critically important,” says O’Neil. The magnetic stripe on the card is programmable, which means data, such as discounts or other rewards, can be written to the stripe at the time of the transaction, read by the merchant’s terminal, and processed by Citi.
The face of the card features two buttons, each with a light source. A cardholder who wants to perform a standard card transaction will press the button labeled “Regular Credit.” If a cardholder wants to apply rewards, she will press the button called “Request Rewards.” The button will light up once pressed.
Participants in two Citi rewards programs—Citi Dividend and Citi PremierPass—are involved in the pilot. PremierPass awards points for purchases, while the Dividend program offers cash. Though primarily a MasterCard issuer, the bank also issues cards on the Visa and American Express networks.
Citi decided to pilot the card based on consumer research, O’Neil says. “Consumers increasingly want more choice, more control, and more flexibility at the point of sale,” he notes. He declines to discuss the cost of the card, but it could have a limited distribution, at least for the foreseeable future. Aaron McPherson, practice director for financial services at IDC Financial Insights, Framingham, Mass., estimates the 2G card is likely three times the cost of a standard mag-stripe card. At that price, he says, “I don’t expect something like this to be in widespread release, at least for several years, just because of the economies of scale.”
Citi will likely restrict the card to elite cardholders, McPherson says. “I assume they’ll be giving this out to premium members, since those are the people who are probably accumulating enough rewards to benefit from it, any way.”
Still, Citi views the card as a significant achievement in itself, and McPherson confirms the bank is the first in the country to issue such technology. “We see this as a significant development not only in cards, but also in the rewards space,” says O’Neil. “We’re very encouraged.”
