At the start of his speech 10 days ago to the Smart Card Forum's annual meeting, Visa International president Edmund Jensen showed the crowd a button he had just been handed.

Its message - "Wipe the Stripe" - and Mr. Jensen's taking note of it were signs of how far the banking community, among others, has come toward legitimizing the once controversial idea of embedding computer chips in plastic cards.

Mr. Jensen wasn't quite ready to pin "Wipe the Stripe" on his lapel, however. He said chips in cards will initially complement the obsolescent magnetic stripes that have been the credit and debit card standard for more than 20 years.

"Let's help the stripe with the chip card and then let the stripe go into a retirement with pride and honor," Mr. Jensen said.


Good-humored as he may have been, Mr. Jensen was the only one who spoke that day in defense of the magnetic stripe. The Smart Card Forum, a year-old, multi-industry group promoting market tests and standardization to advance the technology, is a congregation of the converted.

And the forum is growing in size and power. Since its first meeting in September 1993, the group has grown from 51 to more than 130 members. The open-meeting attendance this Sept. 26 exceeded 400, up from about 150.

Catherine Allen, the Citibank vice president and forum chairman, said the annual gathering has already outgrown the Ritz-Carlton in Tysons Comer, Va., the luxury hotel that was home to many of the forum's key meetings and milestones.

The group still lacks a full-time executive director. Ms. Allen said it hopes to have one by yearend.


In their bigger numbers, smart card advocates are feeling their oats as never before.

The button shown by Mr. Jensen came from Gemplus Card International, Gaithersburg, Md., whose president, Dan Cunningham, is a Smart Card Forum director. This audacious turn in his marketing stems from a growing conviction, shared by many others, that chip cards are about to explode.

Gemplus, for example, which produces most of its cards in France, is adding manufacturing capacity so it can produce 20 million chip cards a month by yearend. Mr. Cunningham said that, the way demand from the United States is picking up, a Gemplus factory in North America "may not be far off."

Meanwhile, Giesecke & Devrient, a German card maker, is beefing up its North American presence. Its sponsorship of a reception at the forum and a speech at the annual meeting by Mark Ferdinands, a product manager in G&D's U.S. subsidiary, reflected the company's growing commitment to the U.S. market.


In talks to the forum and at a press conference, Ms. Allen, the group's chairman, said several factors have contributed to the smart card's momentum - not to mention the prosperity of the wide-ranging membership group -- she spent much of her time pulling together over the past two years.

Among those 'factors: convergence of information, transaction, and communications technologies; lower costs of chips and system integration; a growing realization by credit card associations and other payment organizations that chips can reduce fraud losses; and both public- and private-sector testing and support.

"A large and diverse group of corporations and government agencies are interested in applications" using smart cards, Ms. Allen said.

She sees that in the forum's membership, which includes about two dozen banks, mostly U.S. and Canadian. They are outnumbered by computer, telecommunications, and data processing entities - including some that serve or are owned by banks, such as MasterCard and Visa - and government agencies.

As in prior speaking appearances, Ms. Allen said financial services firms are less likely than mass transit systems, telephone companies, universities, and governments, among others, to be driving forces for chip-based payments.

This has been true in adoption outside the United States of the "electronic purse" - the replacement for cash that is being built around chip cards in several countries.


Addressing her members, who stayed two days beyond the Sept. 26 annual meeting to participate in closed meetings and in the forum's seven working groups, Ms. Allen said several of the group's early assumptions had not held true.

For example, the market was less knowledgeable about smart cards than the forum leadership had anticipated, so it put more of its resources into education.

Also, the forum had not expected to have much of a public policy voice, leaving that to more established associations and their lobbying staffs.

But when a proposed revision to Federal Reserve Regulation E affected smart cards - Ms. Allen said it "came out of the blue" - the forum weighed in with a comment. It also began focusing on security, privacy, monetary policy, and other issues likely to come to the fore as the technology advances.

Regulation E, privacy, and other policy matters are now on the list of major Smart Card Forum issues for 1995.

Others, Ms. Allen said, include establishing and maintaining liaison with standard-setting bodies and the card associations, monitoring specifications for the electronic purse, understanding security issues and their cost-benefit trade-offs, and building business propositions for both multiple-service and multi-application smart cards.

A multiple-service card, she explained, allows the customer to pay many types of merchants. A multi-application card combines many service, for example, payments, telephony, health care records, shopper-loyalty programs, travel ticketing, and the like.


The full range of smart card thinking and testing across industries was represented in the annual meeting's speaker lineup.

Mr. Jensen of Visa, not his MasterCard International counterpart, represented the banking industry. No slight was intended or perceived.

This knowledgeable audience was well aware that MasterCard and its president, H. Eugene Lockhart, were solidly on record in favor of a transition to smart cards over the next seven years.

Many technology vendors at the forum had been in New York just a week earlier to hear Mr. Lockhart and others on his senior team describe their business plan and solicit cooperation in making it come true.

Mr. Jensen's meaty, 45-minute address was as strong an endorsement as has yet come from the Visa side.

The general sense of his remarks approximated what has been heard from the MasterCard camp, but there was no talk of a timetable or of a business case like the one MasterCard people find incontrovertible.

The Visa chief came closest to a dig at MasterCard when questioning "the economic case" in the United States and other places with abundant, reasonably priced telecommunications.

"If we look at the credit card business in the U.S. as separate from banking, it is very difficult to justify adding a chip to the credit card and converting existing terminals and ATMs to read chips," Mr. Jensen said.

"With no personal identification numbers and virtually 100% authorization," he said, "the magnetic stripe with Visa's CVV [card verification value] and neural networks will work securely for the next decade."

Unlike in France, which adopted smart cards to compensate for a lack of on-line authorizations, "chip cards cannot be justified in the U.S. on the basis of telecommunication costs and fraud reduction," Mr. Jensen said.


Still, the Visa chief executive found the technology so compelling that it is a statement of the obvious to say we support chip... How could an association not support it?" "The chip card, as an electronic relationship manager, is a fundamental part of Visa's payment and information services strategy," Mr. Jensen said. "And distributing information processing to the consumer through a chip and other available technologies for value and information exchange is one of the foundation stones of Visa's strategy to support members." He urged that the chip be deployed in the context of "retail banking in its broadest sense" and not be-constrained by thinking only about its credit card or transaction processing implications. "We should not start the chip discussion with a predetermined package or housing, especially one based on a 30-year-old product," Mr. Jensen said.


Mr. Jensen's failure to wear "Wipe the Stripe" may have let down some of the more enthusiastic chip proponents. The Visa chief speculated in an interview later that Master-- Card CEO Lockhart might have been more willing to don the button.

But MasterCard senior vice president Robin Townend gave Mr. Jensen credit for sounding a realistic tone.

Mr. Townend, head of the MasterCard technology team that is moving full-throttle down the smart card road, said in an interview, "It's not going to happen overnight."

Hard-charging MasterCard would not admit to being unrealistic. Quite the contrary, Mr. Lockhart sees MasterCard as technology-driven, and his commitment to the chip is evident in the people and resources he has deployed in recent months.

Among them are Mr. Townend, an internationally respected technologist who came from Barclays Bank in London, and Diane Wetherington, the former head of AT&T Smart Cards.

Mr. Townend understands the complexity of the task. He said his last chip card project at Barclays, a credit card tied to a mobile communications service, took almost three years.

The difference now is that he is helping to lead a global mobilization backed by an association of 22,000 financial institutions. In other forum presentations, each by a group member:

* Robert A.F. Reisner, vice president of technology applications at the U.S. Postal Service, said his agency is poised to play a role in how new technologies replace traditional, paper-based transactions and information exchanges. He sees the smart card helping consumers and businesses to navigate across the burgeoning communications highways. The postal service, he said, would be concerned with security and privacy protection measures such as data encryption and digital signatures, which smart cards can facilitate.

* Harel Kodesh, director of Microsoft Corp.'s personal electronics group, presented the revolutionary Microsoft vision of technology convergence and of the computer's capacity to educate, exchange information, and manage transactions in ways never before contemplated. "Smart cards and the information highway are very closely tied," he said.

Based on experience in mobile communications, mass transit, health care, and interactive or on-demand television programming, he said, "there is no doubt in my mind that the smart card will be the real passport, or access control device, that will allow us to use the information highway across the board."

* John Bermingham, president of AT&T Smart Cards, stressed the need to use the devices to their full potential. He said even today's chip cards, typically with a relatively meager capacity of about 3,000 bytes, are underutilized.

Saying 100,000-byte cards are "just around the corner," he recommended loading multiple applications onto smart cards and viewing them as part of a widening web of intelligence that is also distributed among central computers, terminals, and phones.

The smart card can enhance networks through encryption and authentication and can serve as an "intelligent agent" to help consumers manage their network access and information requirements.

Mr. Bermingham also said AT&T remains committed to the "contactless" type of chip.

AT&T believes its technology will prove superior to the cards that require direct contact with a chip-reading device, but contactless cards have not been included in the joint MasterCard-Visa standards discussions.

"We don't think we can convince MasterCard and Visa today, but there is dialogue between our companies," Mr. Bermingham said.

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