Card frontiers: AT&T Held Fast to Research Even in Hard Times

As befits a subsidiary of one of the corporate world's most prolific research and development machines, AT&T Universal Card Services owns or has access to enough technology to dazzle any prospective buyer.

Much of it is exploratory, such as the company's 10% stake in the Mondex USA smart card franchise. AT&T executives do not expect such activities to have much bearing on negotiations that will focus on $14 billion of credit card receivables.

But the R&D, whether in data mining techniques that yield card marketing ideas or in more speculative aspects of electronic commerce, continued even in hard times. Technologists view that kind of commitment as a key to innovation.

AT&T Universal's advanced technologies-as well as a fledgling merchant processing business with a potentially strong Internet orientation-fall under marketing chief Daniel DeMeo. Although steeped in the nitty-gritty of product development and design, advertising strategy, promotional packages, and competitive analysis, Mr. DeMeo, 39, said he spends up to 25% of his time on the new stuff.

His full title is executive vice president of marketing and electronic commerce. He said the latter aspect made the job more enticing when he was considering his move from GE Capital last spring.

"It is exciting to be involved in the business-development aspects of chip cards and the evolution away from the magnetic stripe," Mr. DeMeo said last week. Mondex puts AT&T "in a position to benefit as chip becomes established in the marketplace."

The current regime inherited Mondex. In July 1996, AT&T and Wells Fargo & Co. put up the initial $48 million to establish Mondex USA and join the inner circle of "global founders."

Mr. DeMeo is a Mondex USA director, AT&T Universal chief counsel Walter Korchun is on the Mondex International board, and chief executive officer Richard Srednicki is a director of MasterCard International, which owns 51% of Mondex International and, like AT&T, 10% of Mondex USA.

Mondex cash cards are widely used on the AT&T Universal campus in Jacksonville, Fla. AT&T is also pioneering cash over the Internet.

"We are not a big debit card bank like Chase Manhattan," another Mondex owner, said Mr. DeMeo. "We focus on the virtual world," beginning with a virtual mall test that began with 200 employees in August.

AT&T, with Mondex and Hewlett-Packard Co., championed Open Trading Protocols, a standard for on-line transactions that has passed technological tests but suffers from competitor Visa's nonparticipation.

"We want an open solution and OTP will take us there," Mr. DeMeo said.

Mr. Srednicki said these issues are "developmental" with no immediate profit prospect. "Our time in the last year was mostly spent on base business," he said.

"But if you look at the Web and how it allows customers to access our services or pay bills, there is probably no one that can match our level of technology and that of our partners, including AT&T. Some of that technology can help us get into new partnerships down the road."

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