A smart card alliance of five telephone companies could raise competitive obstacles to banks that desire to control electronic cash transactions.

US West Communications, GTE, Bell Canada, PTT Telecom Netherlands, and Telekom Malaysia announced formation of the Global Chipcard Alliance at the CardEx 96 conference this month in the Netherlands.

Additional members are welcome. Oracle Corp., the data base software giant, plans to join, said US West.

The alliance wants to create an open standard to allow any smart telephone card to operate in any pay telephone network. Some partners' cards are already interoperable - for example, GTE cards work in telephones installed by US West and vice versa - and alliance members may have the power to affect technology in the banking and payments field.

Though phone card standards are its initial target, the alliance could view electronic purses and other chip card applications as viable opportunities.

Neal Aresti, general manager, telecard, at US West, said the telecommunications industry "should be moving toward interoperability and growing the acceptance of smart cards for telephones and beyond."

The major bank credit card associations have produced a smart card standard called EMV, for Europay, MasterCard, and Visa. It is designed to assure that merchants' terminals accept all compatible cards. The chip card group could incorporate EMV into its operating standard.

"We believe smart cards are going to be a significant platform for small-dollar transactions in the future," said Mr. Aresti. "Financial institutions will not dominate this (payment platform as) they have for traditional financial transactions."

"Our relationships with consumers and businesses are at least as strong as banking relationships," he added.

His was not just a blue-sky statement. US West, with 18,000 smart card phones installed in five cities, plans an electronic purse trial "involving thousands of merchants" in 1997, Mr. Aresti said.

"Banks and telecoms will be able to work together, or they'll be at war with one another," said Jean Cholette, Bell Canada's director of marketing, pay phone services. Advancing technology is blurring the lines between the two industries, he said.

Banks and telecommunications companies have collaborated on several smart card projects, with the latter supplying phone lines for authorization and settlement as well as equipment. "We look to banks as partners, not the enemy," Mr. Aresti said.

Telecom Netherlands formed a joint venture with the largest bank in Holland to launch Chipper, a phone card with merchant acceptance.

Toronto Dominion Bank, which will test the Exact electronic purse program in Kingston, Ontario, has "a good relationship" with Bell Canada, said Steve Phillips, manager, smart card development at the Canadian bank.

Bell Canada will supply phone lines and will also look into the loading of value onto the chip at pay phones and screen phones. Though Bell Canada has more than 60,000 smart pay phones in Ontario and Quebec, Mr. Phillips called it doubtful that the company would launch its own electronic purse project.

Even so, Jerome Svigals, a Redwood City, Calif., consultant and proponent of multiapplication cards that spread the costs of issuance over several departments or organizations, said stored-value chip cards have not been proved profitable for banks. "It's more natural for telecoms to put out a cash card," he said.

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