Chips in cards have existed for a number of years but have recently become much more prevalent with the introduction of chip and PIN. Smart chips have the capability to store far more information securely than existing magnetic stripes and so, in the future, could result in a card being used for a variety of non-banking applications.

Applications that could be incorporated in a debit or credit card could include:

• Loyalty schemes — over recent years there has been a dramatic increase in the number of loyalty cards available, for example Boots, Tesco and Nectar. At the moment these tend to be on separate cards however, with further capacity available on the chip, extra applications such as loyalty schemes could be added to existing debit or credit cards.
• Electronic purse — an electronic card that customers would be able to load with money to then use for small-value payments, for example buying a newspaper.
• Season tickets — combining a debit or credit card with a transport payment application such as the current Oyster card used in London.