Making a bold bid for leadership in smart cards, National City Corp. announced Thursday that it has created a dedicated business unit and placed one of its key technology executives in charge.
The move puts Cleveland-based National City on a faster track than other major banking companies that have not elevated smart cards to the status of a profit center or given them such a high level of executive attention.
The chairman and chief executive officer of the unit, called Stored Value Systems, is Delroy A. Hayunga. He was previously chairman and CEO of National City Processing Co., the transaction processing subsidiary in Louisville.
Mr. Hayunga reports to William R. Robertson, the National City vice chairman who oversees fee-based businesses including National City Processing, which grew under Mr. Hayunga to $350 million in revenues.
The processing company is a close rival of Nabanco and First Data Corp. in handling credit card transactions for retail merchants. Its experience with smart cards in electronic benefits transfer systems, the government programs that replace welfare checks and food stamps with cards and electronic terminals, led National City to the decision to form the separate Stored Value Systems.
"The world of stored value and smart card technology is starting to explode," Mr. Hayunga said in an interview. He said the company is on "the early point of an exponential curve and wants to put the necessary people and financial resources behind it."
Mr. Hayunga, 51, came to National City Processing 10 years ago in what he called a "not dissimilar situation." He "enjoys building businesses from the ground up."
"We feel that the platform we have built to address (electronic benefits transfer) can be used in other arenas that need stored-value applications," said Mr. Hayunga.
In an Ohio chip card pilot, the company serves 11,000 food stamp clients and 90 merchant locations. Under another contract in Wyoming, 5,500 participants in the food stamp and WIC (women, infant, children nutritional) programs can use the cards at 85 merchants.
Stored Value Systems' marketing targets include college campuses, airline ticketing, frequent-shopper programs, the health care industry, and transportation.
National City Processing's airline ticket processing business could provide an entree into ticketless travel using smart cards, Mr. Hayunga said.
He said his unit will not be limited to chip cards, and if necessary, can work with magnetic stripe cards, contactless radio frequency cards, and transponder devices used in automatic toll collection.
"We believe all of those will head to smart card technology," he said, "but we won't force that on anyone."
The stored-value operation opened this week with a staff of 35 who worked on the EBT projects. Mr. Hayunga said he expects to hire a number of key executives in the next few months.
One of the first is Joseph F. Schuler, a smart card consultant in Minneapolis and former head of the U.S. unit of the French card manufacturer Gemplus. "They have all the ingredients to be a real force in the industry," Mr. Schuler said of his new employer. "They're taking an existing organization to form the core of this group. They're not coming in unprepared," said Mr. Schuler, who will be senior vice president for business development and marketing.
"The industry definitely needs systems integrators," said Stephan Seidman, editor and publisher of Smart Card Monthly, based in Washington State's San Juan Islands. "If that's what they'll do, that's great. They certainly have the knowledge and skills to do it."
"The fact that they're putting such a senior executive in to head up the unit shows commitment to the area," said Richard K. Weingarten, vice president at Montgomery Securities in San Francisco.
Mr. Hayunga acknowledged that smart cards will not be widespread for many years. He said the growth will be led by organizations like Visa, MasterCard, and American Express. Stored Value Systems plans to "be aware of and in sync with their standards and work (with them) in partnerships."
But he added, "The closed-loop arena - (where card usage is limited to) one college campus, one large fast-food organization, one health care company -- will take off very quickly. The question is, can we service them now, and I think we can."
As CEO of National City Processing, Mr. Hayunga is succeeded by president Tony G. Holcombe, 39.
