AT&T has announced that it will license its contactless smart card technology, enabling companies around the world to manufacture the formerly proprietary plastic.

The telecommunications giant said on Wednesday that it is negotiating with three undisclosed companies in different areas of the globe for the rights to produce the cards.

"Because of the superiority of the product, we'd like to get it into the market on a more broad scale," said John Bermingham, president of AT&T Smart Cards. "In order to accomplish that, we believe it's time to license the technology to other companies."

The AT&T cards contain a computer chip that can perform multiple functions at the point of sale. The cards are now used by Delta Airlines Shuttle service for ticketless boarding; for highway toll collection in Italy; and by GiroVend Holding Ltd., a cashless vending machine company in the United Kingdom,

Also, Chemical Bank is conducting an internal smart card pilot using the AT&T contactless technology.

MasterCard, Visa, and Europay are setting global specifications for contact chip cards, which have a contact plate that must touch the card reader for information to be exchanged. (See related story above.) AT&T, meanwhile, is promoting its contactless version, with a chip that can be read by holding the card near the reader, so insertion is unnecessary.

AT&T said its cards - with a life span of more than 10 years - are more durable and secure and can perform more advanced functions faster.

Even so, Joseph F. Schuler, a smart card consultant in Minneapolis, said the association's adoption of contact cards "deals a severe blow to any contactless technology."

He said that although AT&T contends its product is better, that has yet to be proven, while the multi-application contact cards in use today in universities "are working just fine."

As the payments industry migrates toward chip technology and electronic purse applications, the bank card associations are promoting the contact concept to merchants, who will have to invest in the equipment to accept the computerized plastic.

Will contact cards suffer the fate of Beta tape, enjoying initial acceptance only to be supplanted by the contactless technology?

"No," said Andrew W. Tarbox, vice president, chip card standards and specifications for MasterCard.

He said the association "took a long look" at contact versus contactless, and "it came down to one issue - cost."

Contactless cards are more expensive to manufacture, he said, adding that it would cost more to outfit terminals to accept both technologies and that contact cards are proven.

He noted that 25 million contact chip cards are in circulation in France, with millions in use as prepaid phone cards throughout the world.

While Mr. Tarbox said that both technologies will have their markets, contactless cards will be relegated to closed applications like transit systems and toll roads. The financial payment and electronic purse applications are already in operation.

Mr. Bermingham said MasterCard was taking a "myopic view" of the industry, and when cards move to multiapplications, security and speed will be of the greatest importance to financial institutions. As the market for smart cards evolves, the tables could turn toward contactless cards, he said.

He added that the cost of the cards, which is about 25% higher than contact cards, would come down substantially as other manufacturers begin production.

Gerald Hubbard, vice president of marketing for Microcard Technology, a CPA Transac subsidiary, which produces chip cards, said AT&T's move is a "substantial" and would "make contactless cards more competitive."

He said the "market would determine" which technology would win in the end. While one terminal could "theoretically" accept contact, contactless, and magnetic stripe technology, he said contact chip cards are established and most cost effective to implement.

Still, Mr. Hubbard, also treasurer for the Smart Card Forum, a multi- industry group supporting the technology, said, "With AT&T's resources" they shouldn't be underestimated. "It'll be very interesting to see the market dynamics in the near future."

Mr. Bermingham believes the jury is still out. "We think our technology is superior with great user benefits," he said. "We want to see it survive."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.