First of America Bank Corp. said it will install the nation's first bank-issued smart card university system on two Michigan campuses this fall.

The University of Michigan in Ann Arbor and Western Michigan University in the bank's headquarters city of Kalamazoo will offer students, faculty, and staff an identification card that functions as an automated teller machine card, a stored value card, and a building access card.

Over the next few years about 100,000 students are expected to hold the cards, beginning with at least 10,000 incoming freshmen in September, said Kurt W. Lutz, senior vice president of new product development at First of America Services. The cards will have a chip and a magnetic stripe.

More than 200 merchants near the campuses are expected to accept the cards as well, giving students a "flexible single-solution card," said Mr. Lutz.

"For First of America this is a strategically important product," said Mr. Lutz. The bank has a presence in several states with large universities that may be interested in a similar product. "We want to establish lasting banking relationships with students which may extend beyond college years," he added.

The bank estimates at least 25% of the students will open checking or savings accounts.

Schlumberger Danyl, a Moorestown, N.J., unit of Schlumberger that supplies magnetic stripe card programs to more than 1,000 universities around the country, will supply the smart cards, smart card readers, and terminals for the two programs.

Michael H. Smith, general manager of Schlumberger's U.S. smart card and systems division, based in Chesapeake, Va., said the program was custom designed using proprietary Schlumberger technology.

He said banks could use the Schlumberger system as a smart card alternative to Visa and MasterCard products. A program could cost under $300,000 for all the point of sale equipment, Mr. Smith said, and less than $1 million with all software development costs included. Those costs would be shared by vending machine operators, merchants, the bank, and the university.

Paul Melanson, executive director of the National Association of Campus Card Users, called the program innovative. "It's a step into the future of smart card technology."

He said he hadn't heard of any other bank-issued campus smart card programs, although Washington University in St. Louis recently implemented a smart card program through National Cash Card. Loyola College, Baltimore, and Drew University, Madison, N.J., also have smart card programs.

Though chip cards are more expensive than magnetic stripe, costing about $3 each, the technology offers more versatility, flexibility, and security, said Jim Schaper, director of auxiliary enterprises at Western Michigan. "It's one of those latest and greatest kind of things."

He said the card would be "superconvenient" for students, who would no longer need to carry cash or other cards.

CashChip Stations bearing the bank's logo will be located around the campuses where students can load value onto their cards by inserting cash or accessing their First of America checking account.

The bank will provide settlement services and receive interchange and fee income, as well as installing the CashChip machines, automated teller machines, and the operating system. Merchants will purchase or lease point of sale equipment, and the university will pay the cost of card manufacturing and of the campus point of sale equipment.

The stored value component will work in campus vending machines, copier machines, book stores, laundry services, and fast food outlets.

The magnetic stripe will act as the ATM component, while also providing access to buildings, meal plans, and other campus functions.

A comparable program for an open setting is in the works. Electronic Payment Services Inc., owner of the MAC network of ATMs, is planning a smart card test next year with 50,000 cardholders and 150 participating merchants in two Delaware townships.

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