Two product announcements exactly two weeks ago, one in Europe and one in the United States, brought the smart card closer to the home.
In Paris on July 10, two of the biggest French banks took the lead on a project with Visa International and others to demonstrate electronic commerce using home computers with chip card readers.
The same day in New York, and with great fanfare, the founders of a year-old company called WebTV Networks Inc. released a television set-top box with a smart card reader that they claimed could bring Internet surfing, on-line banking, and commerce capabilities to the consumer faster than competing technologies.
Each in its way, these ideas made tangible what had long been only theoretical to those who advocate the advanced card technology: a card- based payment and identification system that brings cash and commerce directly into the home - or wherever there is a properly equipped, secure card-reading device.
To some it is the holy grail of direct, or remote, banking services, the equivalent of an automated teller machine in the home. Because the chip embedded in a smart card can hold value, funds can be withdrawn or disbursed - in this case downloaded or transmitted.
Technologists have been saying for years that the technology is ready and available. Payments over the Internet are relatively rare, but real, and some have been assisted with chip cards.
Electronic value transmission was built into Mondex, the smart-card-based electronic cash system invented by Natwest Group of London. Mondex is in a pilot mode, but it could gain momentum now that, as of last week, 17 banking organizations around the world share the status of co-owners of Mondex International.
Last month, at Europay International's convention in Seville, Spain, International Business Machines Corp. initiated cash transfers from a chip card using a reader attached to a personal computer.
At the Cardtech/Securtech conference in Atlanta in May, one of the more intriguing technologies on view was SmartTV, a system that ties smart cards and electronic wallets to what is shown on the screen.
"We have the first simple, fully functioning interactive TV system, and smart cards are at the center of it," said Jane Evans, president and chief executive officer of California-based SmartTV.
But it is a long way from trade-show demos to mass implementation, which would require the widespread distribution of PCs, enhanced telephones, or interactive television equipment with - except perhaps in SmartTV's case - smart card readers built in.
The French consortium - Banque Nationale de Paris, Societe Generale, France Telecom, the card manufacturer Gemplus, and Visa - wants to accelerate an international movement toward full-scale, PC-based commerce, relying on the authentication capabilities of an "intelligent" plastic card and the Secure Electronic Transactions protocol to which MasterCard and Visa have agreed.
"We want to push the electronic solution for commerce using a smart card," said Jean Marc Sarat, marketing manager for Gemplus.
The plan calls for 5,000 to 10,000 consumers early next year to begin using their bank cards - in France they already have chips - with 20 to 30 participating cyberspace merchants. Later, new cards will be issued conforming to the Europay-MasterCard-Visa technical standard, known as EMV. That will make the system compatible with other smart card programs, and therefore exportable.
Small-value, or micropayment, processing will be built into the system, and other French banks will join the pilot later, said Michel Vaquin, executive vice president of payments and electronic banking at Banque Nationale de Paris.
WebTV, a Palo Alto, Calif., company founded by former Apple Computer people, casts its lot with the advocates of interactive television. They see it as having the greatest mass-market potential because the delivery device - the TV set - is already universal and is at least within reach of the broadband communications capability that could readily accommodate interactive services such as banking and shopping.
Until now, with television-based alternatives slow to materialize, most high-tech bankers have focused on PCs and, to a lesser extent, on screen- based telephones. A few of the latter, notably an up-market telephone made by Philips Electronics of the Netherlands, come with smart card readers.
Several companies have brought out television sets that can connect to interactive data or multimedia networks like the Internet's World Wide Web, but WebTV's offering is the first to incorporate a card slot.
Likely to bring WebTV favorable attention are its big-name allies. Through licenses, its set-top device is to be available this fall under the Sony and Magnavox brand names.
Sony Electronics represents one of the most powerful media and communications empires in the world. Magnavox is owned by Philips Consumer Electronics, which is drawn to WebTV for the same reason another Philips company is pushing screen phones: The ultimate mass market cannot be reached via PCs alone, which are in no more than 40% of U.S. households and lower percentages in most other countries.
WebTV executives envision a day in the not-so-distant future when consumers will routinely insert stored-value cards in their television boxes to pay for items they see on the Internet, or to move money from their bank accounts onto the chip cards.
Steve Perlman, president and chief executive officer, hyped the WebTV launch as "a historic event" on a par with Philo T. Farnsworth's invention of television in 1928.
The product, he said, brings the Internet "within the reach of the average person's television" and "can make anyone a publisher" of digital material.
Unlike conventional PC methods, WebTV does not require consumers to configure a modem or install special software for Internet access. The device needs only to be hooked up to a telephone line, an electric outlet, and a cable wire. When turned on, it connects itself to the Net. A consumer can browse Web sites with clicks of a remote control; a keyboard is optional.
While WebTV officials tout the enhanced television primarily as an entertainment device, they also point to its potential as a home banking and electronic commerce channel.
"Some people think paying bills is the 'killer app,'" Mr. Perlman said. "I don't know, but certainly it's going to make life easier for a whole lot of people."
Some cutting-edge banking types tend to agree.
"That's the type of device we've been looking for," said Rup Parmar , manager of systems development for Vancouver City Savings Credit Union. The Canadian institution has been allowing members to pay bills and conduct other transactions by television. The catch is that the bank must distribute a CD-ROM reader to each participant.
Ms. Parmar said a set-top box that can read chip cards would solve the identification and authentication problems inherent in dealing with customers who can't be eyeballed.
"I think there's a whole slew of services, which people now have to go into the branch to do, or have to write a check to do, which they'll be able to do from their home," she said. "With a chip card and password, you can pay your landlord, pay your phone bill, or whatever. It's really exciting."
James M. Shelton, chief executive of the Online Banking Association in Corte Madera, Calif., said the card-reading feature "further enhances the convenience that on-line services provide to the customer."
"High-speed, broadband access to the Internet will provide many opportunities for the bank to provide more efficient delivery of financial services," Mr. Shelton said.
But he cautioned: "There's some concern. Will people find the TV an acceptable medium for browsing the Internet?"
Even if consumers cotton to the idea of toggling between their favorite shows and pet Web sites, it will be some time before chip cards enter the equation. Reading devices simply can't be deployed overnight.
"We're excited about the concept of chip cards moving into the home," said Brent W. Robinson, senior vice president of Visa Interactive. "One of the challenges to getting that to occur is having enabling technology, the hardware to actually read the cards."
Another challenge, he said, is "having interesting things for the consumer to do so they'll want to load cards in their home."
He expects interest to build after the Visa-sponsored cash card test in Atlanta, and another in New York City next year to test interoperability of Visa and MasterCard systems. "We've been running a pilot at the Visa headquarters cafeteria for quite some time now, and it is just so much easier to use a chip card than cash," Mr. Robinson said.
And if there proves to be significant demand for WebTV, he added, it might lower price and resistance barriers to pervasive chip card use.
"When you start talking about hundreds of millions of cards, then the costs from a card standpoint are important. But certainly there's a business model there that works," he said. "On the question of actually moving the devices, whenever you ask a consumer to actually put something else in their home, that creates a barrier."
The obstacle is overcome, Mr. Robinson continued, and the necessary infrastructure created, if consumers voluntarily buy the new sets and want to use them for a variety of commercial transactions.
Gary Arlen, an electronic commerce consultant in Bethesda, Md., said he had heard "a lot of buzz" about WebTV but questioned whether the company would meet its ambitious goals.
"It's very difficult to introduce new products that take explaining," he said. "As long as consumers are confused, nothing takes off." With many entrepreneurial ideas vying for attention, and consumers yet to state their preferences, "It's the Sony Betamax versus VHS issue to the nth degree," Mr. Arlen said.
But Jerome Svigals, an electronic banking consultant in Redwood City, Calif., called WebTV an "outstanding" product, particularly because it is "plug and play."
"It does what the ATM did for self-service banking," he said. "It basically reduces to an absolute minimum the technology understanding requirement."
Still, "it's probably going to be six months to a year" before all the technical elements are in place, including the digital certificates and signatures called for in the MasterCard-Visa security standard, Mr. Svigals said. "Theoretically, you could put a Mondex card in there tomorrow and use it, but there are a few details to be worked out."
Technology aside, the most often heard objection to banking via television is that entertainment and the serious business of banking and bill paying don't mix. Would a parent interrupt a child's cartoon viewing or Nintendo session to check on a balance?
Dudley Nigg, executive vice president of direct distrbution at Wells Fargo Bank, said he does not view interactive TV as the launching pad for massive smart card deployment, at least not in the near term.
"There could certainly be a use for the card in on-line payments and authentication," Mr. Nigg said. "But I believe there are more compelling environments" than interactive TV, particularly PC access to the Internet, where "a hardware interface that identifies you is what's lacking."
Mr. Nigg, a director of Mondex International, said he expects loyalty- point systems and information storage applications, such as in the medical field, to be a greater spur than television to smart card deployment.
"If you get the right kind of interface, I can see people doing their banking" via television, said Mark A. Johnson, executive vice president of Checkfree Corp., which is active in several areas of remote banking and bill paying. "I don't think there would be a lot of data inputting for financial management programs, but fairly simple things like paying bills and checking balances.
"The concern about smart cards is infrastructure. There will have to be a lot of retrofitting to get them used at the point of sale," Mr. Johnson said. He believes they will take off first in closed settings, like college campuses.
"The PC is a much more logical choice (than interactive TV) for banking applications with smart cards," said David E. Weisman, an analyst at Forrester Research in Cambridge, Mass.
Therefore, he sees the forthcoming French experiment, which will include distribution of high-speed modems with free or low-cost card readers, as one where "the smart card could really start to blossom" as a portable data storage and digital certification tool.
With 22 million chip-enhanced bank cards in circulation, France seems an ideal testing ground, said Dan Cunningham, an industry consultant and ex- Gemplus executive, based in Potomac, Md. "France may set the standard for the Internet, as it has for smart card applications."
Benjamin Miller, a Rockville, Md., consultant and organizer of the Cardtech/Securtech conferences, called the French project "one of the first real-world manifestations of the secure Internet commerce that we've all anticipated for several years."
