ABN Amro Bank is using smart cards to secure large electronic funds transfers.
The Amsterdam-based bank rolled out the program, Financial Automated Center for Electronic Transfers, or Facet, in its New York office in February. Fifty-five correspondent banks and branches worldwide now use the system.
This wholesale application offers a glimpse into the possibilities for wider, mass-market uses of smart cards.
Like many technologies, smart cards have made faster progress in the United States when corporations and government agencies embraced them.
Though the U.S. government, among others, has used smart cards as transaction security tokens for several years, the systems have been slow to penetrate the retail market. Consumer smart cards have taken off faster in some European countries where telephone companies, banking associations, and others were more able to justify their costs through fraud reduction.
Security needs are self-evident in wholesale electronic funds transfers that can run into millions of dollars. ABN approached it from that wholesale perspective and with a European openness to the technology.
Its "customer payment initiation system," said Vincent Yannacci, vice president of ABN Amro in New York, "allows the bank to have a comfort level that customers are initiating sensitive financial transactions that are secure."
ABN Amro's New York headquarters is the bank's U.S. dollar clearing center, with 500 correspondent bank relationships. Mr. Yannacci said it moves $1 billion a day electronically.
The Facet system uses smart cards from Bull Group of France, and software designed and implemented by Visual Web Solutions Inc., New York.
The system allows customers to enter payment and transaction information off-line. They can then go on-line and transmit the data, which is encrypted, or scrambled, with the aid of a smart card inserted at a desktop computer.
"These products are very exciting for banks, but not all banks are aware of them or have the same sort of vision that Amro does," said Ricardo de Senna, president, Visual Web Solutions.
Wholesale electronic funds transactions are "an enormous business and very, very profitable," he said. In New York alone, Mr. de Senna said, $200 billion in electronic funds transfers moves through clearing houses.
Wholesale electronic funds transfers give insights into the security and infrastructure requirements the retail market will have to address, said Charles W. Cagliostro, director of strategic alliances at Gemplus North America, the Montgomeryville, Pa., unit of the French smart card maker Gemplus Group.
"Wholesale systems are proprietary in nature," Mr. Cagliostro added. "Retail systems need a more open standard and infrastructure," but "the requirements are the same for security."
"You are talking about millions of people on the consumer side," said Patrick Dumas, vice president, technology and partnerships, Bull personal transaction systems.
"You can deploy it fairly easily on the wholesale side because it involves relatively few banks."
