Three multinational bank credit card associations said they have completed the first phase of a fast-moving project to set compatible technical specifications for smart cards.

Visa International, MasterCard International, and MasterCard's European ally Europay International said they are on course to complete the effort in the fall, within a year of its December 1993 launch.

It will result, the organizations say, in a global system capable of processing information and payments on smart cards as seamlessly as existing networks handle credit cards with the prevailing magnetic-stripe encoding technology.

By April, after meeting every few weeks, 10 technical experts from the three groups had drafted the first series of specifications for cards equipped with integrated-circuit chips.

Formal announcement of this first of three parts of the specification, a 40-page document, came Monday, after completion of a review process that included input from the major manufacturers of chip cards, said Peter Hill, senior vice president of payment technologies at Visa International in San Francisco.

Mechanical Aspects

Part one includes mechanical characteristics of the chip, its dimensions, the location of its contact points on the plastic card, voltages and other electrical characteristics, and the transmission protocol governing communications between the chip and card-reading terminals.

Part two, due to be completed in the third quarter, will identify the commands, data elements, and selection of applications that will define how the chip card and merchants' point of sale terminals will interact.

A joint announcement by the associations said part three will then "complete the puzzle by illustrating how the chip card, POS terminals, and networks will work together to complete a financial transaction."

Europay, MasterCard, and Visa officially set their final target for the fourth quarter, but Mr. Hill said they expect to be finished in October.

The effort adheres to a framework established by the International Standards Organization. Mr. Hill said that while that group's project has been under way several years, the bank card associations had a sense of greater urgency because they see the technology as inevitable.

"Chip cards have come of age," Mr. Hill said. "We have to get standards in place because we all have a tremendous job of software modification ahead."

Mr. Hill, who personally does not take part in the working group but oversees five Visa people who do, said the speed of the program is particularly impressive in light of the fact that meetings are frequent and intense, and rotate among Visa's headquarters in San Francisco, MasterCard's in New York, and Europay's near Brussels.

The announcement of the tripartite specifications project last December caught some card industry observers by surprise. Though they had been laying the groundwork behind the scenes, the competing groups appeared outwardly still to be debating the merits of a major commitment to smart cards, and to the considerable expense of producing a more expensive type of card and retooling existing terminals and networks to handle it.

MasterCard tried to sell the global card industry on smart cards in the 1980s, but failed to convince bankers -- who listened to a skeptical Visa -- that fraud reductions and perhaps other benefits would provide a handsome return on the necessary investments.

The technology was then consigned to MasterCard's and Visa's research labs, and to a nationwide experiment in France, where the government supported the technology and the banking community adopted a chip-based card standard.

By 1993, MasterCard and Visa officials were saying it was a question more of "how" and "when" than "if" the more durable and secure chip technology would begin to displace magnetic stripes. Europay became the first of the major associations to have its board endorse the technology, helping set the stage for the specifications project.

"It is generally held that with these specifications in place, a major hurdle preventing the implementation of chip card technology has been overcome," said the associations' announcement Monday. "Additionally, the global specifications will help merchants protect their investment in future terminal hardware and create the economy of scale necessary to keep chip prices competitive.

"When completed, the three-part specification will set the stage for the worldwide introduction of integrated circuit cards that are capable of functioning across borders and systems," the groups continued. "With this joint agreement, the card organizations have accelerated the development of specifications that will poise the payment cards industry to meet the payment needs of the next century with relative ease and confidence."

Each association, meanwhile, puts its own competitive spin on chip card developments.

MasterCard Recruiting Coup

"The joint specifications project for chip cards will enable MasterCard and its membership to be fully prepared to take action when the new payment platform is required," according to a prepared statement by Philip P. Verdi, MasterCard's executive vice president of electronic services.Timetable for Chip Card SpecificationPhase Areas Covered SchedulePart I * Mechanical and electrical Completed characteristics * Card-terminal responses * Transmission protocol Part II * Interactions among cards, Third Quarter terminals, and the customer Part III * Definition of how card, merchant Fourth Quarter terminal, and networks complete a financial transaction Sources: MasterCard, Visa

He and other MasterCard officials were en route to this week's Europay annual meeting in Norway, and could not be reached for further comment. But MasterCard rocked the smart card world in recent weeks by recruiting two leading experts in chip technology and its marketing -- Robin Townend from Barclays Bank and Diane Wetherington from American Telephone and Telegraph Co.

Another key member of MasterCard's technical team, vice president Andrew Tarbox, joined in January after eight years of chip card experience in France and the United States.

In coming weeks, Visa will add two highly regarded veterans of the French rollout -- Marc Kekicheff and Christine Woillez from the Cartes Bancaires organization -- to a stable that includes Jean McKenna and Einar Asbo, who have been influential in standards development and in cross-industry informational programs like the Smart Card Forum.

Visa also made smart cards a priority for Ann L. Cobb upon her recent promotion to chief of product development for Europe. Ms. Cobb jumped from Europay to Visa's Europe-Middle East-Africa region in 1992.

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