Amex to Test Smart Cards With Hilton And IBM

American Express Co. announced a test of smart cards Wednesday with Hilton Hotels Corp. and International Business Machines Corp.

Continuing a strategy that contrasts with early smart card efforts by banks, American Express will kick off the six-month pilot in June at the O'Hare Hilton in Chicago and seven other airport Hiltons, where the cards will automate check-in and check-out.

American Express and IBM, as provider of the operating system, had previously worked with American Airlines on smart card-based, ticketless travel.

Several thousand Hilton customers are expected to participate in a showcase of multiple functions on cards, considered by industry observers to be crucial to smart card technology's success in the United States. Most of the bank tests so far have involved a single function-stored value-that most experts say has yet to prove profitable.

The three-company trial "will create a compelling business case for smart cards," said David Boyles of American Express.

"American Express is not interested in promoting smart cards for technology's sake," said Mr. Boyles. "Our goal is to give value and convenience through globally operable, multifunctioning cards."

The partners would not disclose costs of the pilot, but Robert E. Dirks, senior vice president of marketing for Hilton Hotels, said they "expect a huge payback." Hilton expects to be in a "leadership position ahead of our competitors."

Citing differences with stored value cards, Mr. Dirks said, "We all believe there are economic benefits to this program. If you can increase loyalty of customers, that's a financial benefit."

The customers' name, address, and other personal information, as well as hotel and travel preferences and loyalty programs will reside on the chip, developed by IBM. American Express payment functions will operate on a magnetic stripe until an infrastructure in the United States can accommodate chips, said Mr. Boyles.

Selected members of Hilton's HHonors and Diamond VIP programs, Hilton Optima cardholders, and American Express Corporate card members will be able to check in and out of participating Hiltons by inserting their smart cards into special kiosks. Front-desk staffing could be reduced.

The machines will display the traveler's reservation, select a room, issue an electronic key, and print out room directions. Upon checkout, a receipt will be printed. In the future, chip transactions can reduce paper, making expense reporting easier for corporate travelers and their employers.

Holders of the American Airlines smart card-issued for a test that began last October at 21 U.S. airports-will also be invited to participate in the Hilton experiment.

As an incentive, guests can earn up to 55,000 loyalty points for using their smart cards at participating Hiltons.

"It's a step forward" for the smart card industry, said Dan Cunningham, senior vice president of Phoenix Planning & Evaluation, Rockville, Md. He said the "household-name companies involved show that major players are getting serious about smart cards."

The program addresses the core of the travel and entertainment sector- the frequent business traveler, said Mr. Cunningham. "If banks continue to position themselves rather than implement, they'll be left further and further behind."

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