Great inventions progress through three stages:
*Old functions operate within new technology - for example, the internal combustion engine begetting the horseless carriage.
*New technology is used to expand upon old functions. Enter the delivery truck.
*The invention changes people's lives - suburbs and shopping centers.
The integrated-circuit card started as a simple, "smart" analogue of existing cards. Now it is entering stage two, as a personal information wallet.
Tomorrow, it will be the "electronic life mall," a key opening the door to all desired interactions through broadband communications: shopping, travel, education, health services, government services, hobbies, and other aspects of daily life.
Unfortunately for bankers, implementation of the second-phase personal information wallet is proceeding largely without them. It is a concept Microsoft chairman Bill Gates has been discussing for two years: an electronic device such as a smart card that carries information relevant to personal security and service access. It would provide mobility for the cardholder, who could use personal computers at home or office, a laptop computer, or any other such unit to gain access to the Internet.
To realize this vision, Microsoft has proposed a specification called Personal Information Exchange, or PFX, to the World Wide Web Consortium.
MasterCard and Visa have put forward the Secure Electronic Transactions protocol, or SET, to ensure the security of credit card transactions on the Internet. But the specification provides for the certificate - a key aspect of cardholder security and authentication - to reside in a personal computer.
There was no provision for mobility among PCs, as in Microsoft's PFX. One card association indicated recently that it would take another year to get the certificate compressed sufficiently to fit onto a smart card with "reasonably sized" memory.
The bank card industry's lack of mobility with SET is an invitation for others to fill that void.
Meanwhile, another recent effort - the PC/SC, or personal computer/smart card, working group - could catalyze a true open-network, "smart" credit card. The working group's participants included the Bull Group, Hewlett- Packard, Schlumberger, Siemens-Nixdorf, and Microsoft. The resulting specifications promise to ensure interoperability among smart cards, readers, and PCs from different makers.
The group has been working since May and hopes to deliver a result in the current quarter - a service to the industry, at no charge. Anyone with a PC and smart card reader, with telephone and Internet facilities, can enter into the payments-transaction business.
This idea may be attractive to airlines, travel agencies, retailers, insurers, government agencies, and others with a desire for open-systems- based credit card processing. Financial services companies could develop Mondex-type payment solutions.
The recent announcement of Integrion Financial Network, a remote banking venture of International Business Machines Corp. and 16 major banks, only increases the need for a personal information wallet and PC-to-PC mobility.
Phase three, the "electronic life mall," is in sight, in the form of the multiple-application smart card that can integrate financial, travel, telephone, retail, medical, and other services that lend themselves to open-network connections.
Who will be the issuers of multiple-application smart cards? The new open-system specifications offer that opportunity to just about anyone. If the issuer is outside the banking industry, it will contract with a bank just for the portion of the service that requires payment system access, as some brokerage firms do today with their integrated account packages.
The bank card associations may not be helping, but there is still an opportunity for banks to be influential in the shaping of the personal information wallet and electronic life mall. They must quickly understand the business case, however, and take part in consortiums to do multiple- application pilot testing and gain critical experience with open networks.
Mr. Svigals, a card technology pioneer, heads Jerome Svigals Inc., a consulting firm in Redwood City, Calif.