They seem like a marketer's dream: College students, prime targets of credit card programs for more than a decade, are being introduced to a new type of card with potentially even greater utility. These cards can enable them to do a significant amount of their buying via plastic. People in the industry refer to them as one-cards, devices that open most necessary doors and cover most necessary transactions for a campus denizen. Thousands of U.S. campuses already have some sort of card-based student identification or payment system, but most use aging technology and are likely to be revolutionized by smart cards. Banks, transaction processing companies, smart card vendors, and system integrators are swarming around the college market, which suggests it is only a matter of time before the entire student population, not just those solicited by credit card marketers, is hooked in. Because embedded-microchip smart cards can be encoded with far more information than their magnetic-stripe forerunners, chip cards can accommodate campus food program credits, security access data, and library records simultaneously and without straining their memory capacity. Therefore, smart cards are also capable of being stored-value purses and automated teller machine cards; potentially, they could include a credit function. These features make the technology capable of capturing a large percentage of students' noncash transactions electronically. College students have long been favorites of financial card marketers. They comprise the largest identifiable segment of first-time customers for the likes of MasterCard, Visa, and American Express. It costs issuers 50% less to generate student applications than those from other groups. The college and university population is also growing. The student total is expected to increase 5.2 million, to 19.3 million, by the year 2000, according to Eric Weil of Strategic Marketing Communications, a Ridgewood, N.J., marketing and publishing firm. But credit and debit cards are involved in only about 10% of the transactions students perform, according to Matt Price, director of consumer credit products at Visa International. A smart card could boost that share because it can work at fast-food restaurants, convenience stores, emporiums like K mart, and other retail establishments where transaction sizes typically restricted students to using cash or checks. There is tremendous interest in this product, said Robert Golisek, manager of new product development at First of America Bank, Kalamazoo, Mich. The bank is launching smart card programs at the University of Michigan and Western Michigan University this fall by issuing cards to first-year students at orientation. The bank and its university partners are working hard to sign up retailers and vendors as well. First of America anticipates having about 250 on the system by September. Smart card advocates see universities as ideal testing grounds. These communities are seen as closed environments, consisting of a campus and nearby businesses that cater to students. Such well defined settings make it easier to launch a program and sign up vendors, said Mike Smith, general manager of Schlumberger Smart Cards and Systems, the Virginia-based division of the global engineering and technology company. Promoters of the technology are eager to prove its multiapplication usefulness. They note that European nations have for years used smart cards in public telephones. And Germany has incorporated the technology into its national health care system. In the United States, Visa International will be installing a smart card program at the 1996 Olympics in Atlanta with NationsBank, First Union, and Wachovia. More than one million cards will be issued, and consumers can use them at fast-food restaurants, grocery stores, pay phones, and vending machines, as well as on buses, subways, and in taxis. But amid all the excitement, smart cards have some drawbacks. First, they are expensive, costing from $3 to $16 apiece, compared with 50 cents for the standard, mass-produced, magnetic-stripe cards. A lot of universities are tightening their budgets, said Kevin Mullen, administrator of the National Association of Campus Card Users. The costs of the smart card programs make it more difficult to upgrade their technology. For example, Florida State University launched its cards, which carry two magnetic stripes, two years ago. They function as library cards, meal cards, photo IDs, security cards, and long-distance calling cards, at a cost of 35 cents each, said Andy Marks, vice president of business development at Total System Services Inc., a processing organization based in Columbus, Ga. Fort Hays State University in Kansas and Virginia Commonwealth University plan to issue dual-magnetic-stripe cards this fall as well. Fort Hays' partner is Commerce Bank of Kansas City, Mo.; the Virginia school's partner is Central Fidelity Bank of Richmond. Even die-hard dual magnetic stripe advocates admit that their product's technology is limited it can only hold so much data. Florida State plans to convert to a smart card system by September 1996, Mr. Marks said. And First of America's Mr. Golisek said he will administer programs at more than eight universities by the fall of 1996. The cost problem may eventually disappear, said Mr. Smith of Schlumberger, as the costs of microprocessor chips and related computer technologies continue their long-term decline. Mr. Marks said universities can actually count on smart cards for a revenue stream. They could collect percentage rebates from retailers and ATM facilities every time the card is used off campus, he said. Some observers question the propriety of a college card program as a profit center delivering what amounts to a kickback in return for the university's promotion of participating retailers and their products. Mr. Mullen of the campus card association also pointed out that, in most of these programs, a single bank offers the debit card service, forcing students to have an account at that bank. Total System's Mr. Marks doesn't see it that way. Universities are supplying a service to students, he said. As it stands now, every time a student makes a phone call, the college gets a cut, and I don't see a conflict there. One new player in the smart card market is a charge card company that has aggressively pursued the college market for years American Express. The company has about 11% of students carrying its card, compared with 68% for Visa and 46% for MasterCard, according to The Nilson Report. In August 1994, American Express began marketing its Optima card to students as well. In May, the company's travelers check group acquired Special Teams, a South Dakota designer and deliverer of stored-value payment systems. These systems are used primarily in the dining services at 194 educational institutions but can accommodate all the functions of the Schlumberger smart card. An American Express Campus Funds card is planned for the near future, but the company declined to release projections or other details of the product's launching.

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