While MasterCard and Visa share top billing in Internet payment security standards, their rival American Express Co. is angling for at least part of the limelight.
In keeping with its strong No. 3 position in the credit and charge card business, and given the widely held belief that competitors must cooperate on technical matters if Internet commerce is to take off, American Express in recent weeks has laid claim to equal partnership in the campaign to promote virtual payment systems.
It may even be going that one better by asserting its own leadership credentials in some specialized aspects of business-to-business commerce.
For example, American Express has taken some of the work it has done on smart cards for the corporate market and proposed it as an interoperability standard for the entire travel and entertainment industry.
"We have shown the value of convenience and control that multiple- application smart cards provide business travelers and corporations," said Ed Gilligan, president of American Express Corporate Services, the unit behind many of the standard initiatives.
"As more companies offer smart cards in the travel and entertainment arena, it is critical that the industry work toward standards to achieve interoperability," Mr. Gilligan said.
American Express offered its proposed standard smart card component- called the multiple function file structure - to other companies last month. At about the same time it announced with MasterCard International, Visa International, and JCB Company Ltd. of Japan the intended formation of SETCo, a joint venture to administer technical aspects of the Secure Electronic Transactions protocol for on-line credit card payments.
For more than two years, SET had been a MasterCard-Visa project with support from leading technology suppliers like International Business Machines Corp. and Microsoft Corp. All along, American Express made its intention clear to ride on SET, just as it adhered to the card-encoding and terminal-reading standards that enable its cards to be accepted by the same devices that take bank-issued cards.
When credit card industry leaders saw the need to extend the multiple- brand compatibility of physical points of sale to smart cards, MasterCard and American Express commenced discussions in 1995 that eventually included Mondex, Visa, and key system vendors.
SETCo takes such commitments to interoperability-and a shared recognition that in Internet commerce the major card companies will likely succeed or fail together-to a new level.
"We, Visa, MasterCard, and JCB reached the conclusion that trying to compete on differences in security would fragment and confuse the marketplace," said Andrew Bartels, American Express vice president of electronic commerce. "We came together in a narrow band of activities-a common architecture for card security on the Internet.
"Competing in that area would be to shoot ourselves in our own feet."
American Express takes these principles further and may thereby be increasing its influence over electronic commerce standards.
The company was the driving force behind OBI, or Open Buying on the Internet, a consortium supporting a standard for the automation of small- dollar corporate purchases that lend themselves to purchasing cards.
American Express was also the first company from outside the telecommunications industry to join the Global Chipcard Alliance, a group that could carry significant weight in the coming development of multi- application smart card standards. IBM, Microsoft, Oracle Corp., and the chip card maker Gemplus have also joined, adding heft and prestige to an alliance that so far has not attracted major banking organizations.
Glenn Weiner, another vice president of electronic commerce at American Express, said the Global Chipcard Alliance is confident that it can embrace the full smart card spectrum. American Express got in early, he said, because the alliance's mission was in keeping with Amex's.
The company is under no illusion that one such association will come up with all the required answers. Mr. Weiner said Amex expects to work with many "of the organizations and bodies that are working on pieces" of the technical puzzle. "It is a huge, huge undertaking."
"We want to focus on our core areas of competency," Mr. Weiner said. "When it comes to other functions and applications, if there is an organization with similar principles that further the goal of open and interoperable infrastructure, then it is only natural that we would participate."
Mr. Weiner, who works in the business unit that New York-based American Express calls its smart card center of excellence, said the Global Chipcard Alliance embodies the three requirements that Amex believes the technology needs: openness, interoperability, and innovation.
"Smart card technology's promise won't be realized by any constituency without a global interoperable infrastructure," Mr. Weiner said.
The Global Chipcard Alliance began with telecommunications companies-the likes of Bell Canada, Deutsche Telekom, PTT of the Netherlands, GTE Corp., and U S West-which tend to be ahead of their financial services counterparts in bringing chip cards to a mass market.
According to statements emanating from its annual meeting Nov. 11 in Malaysia, the alliance foresees many services and applications being consolidated on single cards, and wants standards and operating guidelines in place to streamline acceptance. The group said it will adopt a service mark to certify "GCA approved" cards and terminals.
When it comes to payments, the chipcard alliance could bump up against the currently incompatible operating systems of Visa, MasterCard-Mondex, Proton, and other smart card proposals.
"It seems like everybody wants to get in the act," said Dan Cunningham, senior vice president of Phoenix Planning and Evaluation Ltd., Rockville, Md., and president of the Smart Card Industry Association. The scope of the Global Chipcard Alliance "has broadened," he said, but it's not clear how they will pull it off."
Mr. Weiner of American Express conceded that the picture is confusing, but said "a lot of moving parts have to be lined up" and must be approached one at a time.
In that spirit, American Express offered to license the smart card multiple function file structure and said "several large companies" have expressed interest in it.
The file structure, which American Express uses in smart card testing with airlines, hotels, and the government, currently includes personal and company or government agency profiles, plus airline, hotel, car rental, payment, and other T&E-related data.
American Express will offer licenses even to competitors, in hopes of creating the necessary technical commonality across all participants. The company pledged to "cooperatively adapt the file structure ... and upgrade it on an ongoing basis."
"The opening of our smart card development work to others demonstrates our unwavering commitment to interoperability, the single most important challenge facing the smart card industry," said senior vice president David Boyles. "Only through interoperability will we achieve a level playing field where competition spurs innovation and better products for our customers.
