Visa and MasterCard both optimistically heralded smart card milestones last week, both boiling down to the initials EMV.
Visa International, in the latest move stemming from a recently completed study on smart card economics, announced Visa Smart Path-an initiative to accelerate deployment based on concepts such as relationship- building and customer loyalty that are expected to appeal to card-issuing banks and their customers.
With technical interoperability essential to its strategy, Visa mandated strict though phased-in compliance with EMV, a set of standards hashed out a few years ago by Visa, MasterCard International, and the latter's European affiliate, Europay International.
The Europay-MasterCard boost to EMV came in the form of the first cross- border transaction of that kind. Barry Fergus, an executive of Barclays Bank of Britain, paid for a bottle of wine at Modra Gula, a restaurant in Bratislava, Slovakia.
"This transaction is tangible proof that EMV chip interoperability is now a reality within and beyond the boundaries of the United Kingdom," where banks are in the midst of a full conversion to smart credit and debit cards conforming to the publication known as EMV '96, said Mr. Fergus, Barclays' director of international development.
Mr. Fergus said the transaction signified that "our MasterCard cardholders will now be able to benefit from the distinct advantages of smart cards both at home and abroad."
He added that in its initial rollout phase, Barclays plans to issue more than 400,000 EMV-compatible MasterCards.
The Slovak Republic was the second country, after the U.K., to adopt EMV, following testing by Slovenska Sporitelna. That bank, also in the forefront of the chip card migration of Visa's CEMEA region-Central and Eastern Europe, the Middle East, and Africa-said it expects to have 100,000 EMV-based Maestro debit cards in circulation by yearend.
The bank's remaining 200,000 cardholders would be converted by 2000. All 982 of the bank's point of sale terminals and 200 automated teller machines are to be EMV-ready by the end of this year.
Visa president and chief executive officer Malcolm Williamson defined Visa Smart Path as a way for banks to "differentiate their products and services and enhance their customer relationships."
He said stronger relationships and ultimately profitability are "the overriding goal" of Smart Path-"in short, keeping banks strongly competitive and profitable, now and into the future."
These have been recurring themes for Mr. Williamson, who joined Visa last year from Standard Chartered Bank, which has aggressively promoted smart cards in Asia. The CEO has been talking up the cost-benefit analysis, which concluded that Visa members over 10 years could increase their payments revenue by $5 billion to $7 billion using customizable, multiple- application smart cards.
The Visa study also found that member banks stand to lose as much as $30 billion of business to competitors that might seize the initiative more quickly.
Visa, which counts 23 million chip cards in its network worldwide, has had to stay strategically flexible. Whereas its CEMEA and European Union regions have set timetables for conversions to smart cards over the next four years, the United States banking community continues to enjoy low fraud rates and high on-line efficiency with its old magnetic-stripe card infrastructure and has not moved much in the chip direction.
In the Smart Path plan, which was endorsed at an international board meeting this month, Visa set several "key milestones." New chip-based Visa debit and credit programs starting after Dec. 31, 2000, must comply with EMV; all current chip programs must be EMV-compatible by Dec. 31, 2003; and EMV must be built into all new chip-accepting terminals, meeting Visa's international interoperability specifications, from January 2001.
Along with the milestones, Visa Smart Path provides recommendations to help banks and merchants to avoid costly investments in equipment that may not be upgradable.
Visa also announced a program called Accelerating Acceptance, enabling member institutions to take advantage of favorable pricing that Visa has negotiated with 10 major technology vendors.
