SmartCash, a high-profile smart card project, has suffered the departure of two key executives, fueling speculation that it is running aground.

Its failure would be an embarrassment to several of the biggest U.S. banks, which, along with MasterCard International and Verifone Inc., had climbed aboard the SmartCash bandwagon.

A top SmartCash official scoffed at the rumors, but in so doing may have lent them credence. That he decided to go public after months of silence indicated that the rumors had spiraled out of control.

"We intend to move forward with the formation of SmartCash," said David Van Lear, chairman and chief executive officer of Electronic Payment Services Inc., the electronic banking company that has been the nexus of SmartCash activity since the group formed last summer.

Its goal was to create the first nationwide stored-value card - and make money at it.

Mr. Van Lear acknowledged in an interview that SmartCash's efforts to raise investment capital, with the aid of San Francisco-based Montgomery Securities, are taking "longer than expected."

But he added, "I remain optimistic."

Mr. Van Lear, whose company operates the MAC automated teller network, had rarely if ever spoken publicly on behalf of SmartCash.

Coming to widespread attention in recent days and weeks were the departures of Ashok Narasimhan, SmartCash's acting chief executive, and Bernard David, Electronic Payment Services' director of marketing and planning.

Mr. Narasimhan was "on loan" from Verifone, the transactional terminal manufacturer, to help get SmartCash off the ground. Mr. David was one of the leaders of his company's Smart Card Enterprise unit.

Insisting SmartCash would not be derailed, Mr. Van Lear said that Mr. Narasimhan withdrew from consideration for permanent CEO - a search is under way - and Mr. David had finished the groundwork he had been assigned.

Reached by telephone, Mr. Narasimhan said only that he left for personal reasons. Mr. David could not be reached.

"Losing two-high level executives in an organization in the building phase has to be a serious setback," said Joseph Schuler, executive vice president of National City Corp.'s Stored Value Systems.

Mr. Schuler, whose bank is a stake holder in Electronic Payment Services, said SmartCash has also lost members, including Verifone, MasterCard, and Chase Manhattan Corp. "The alliance doesn't seem to exist anymore," he said.

"If it's fallen apart to the extent rumors indicate, there's no resurrecting it," said Ben Miller, publisher of Personal Identification News and organizer of the Cardtech/Securtech conference.

A spokeswoman for MasterCard said it is still in SmartCash. Citing the consortium's nondisclosure policy, she declined further comment, as did Verifone representatives. Chase officials were unavailable for comment.

The SmartCash woes compound others at Electronic Payment Services, which has repeatedly delayed its own smart card launch in Delaware since announcing it in 1993. Mr. Van Lear said it will happen this year.

In February, the Wilmington-based company let 26 staffers go, spurring speculation it might be sold. National City and the four other owners - CoreStates Financial Corp., Banc One Corp., KeyCorp, and PNC Bank Corp. - are also in SmartCash along with Chase, BankAmerica Corp., First Union Corp., and others.

The real problem with SmartCash is "there is no product," said someone who resigned several months ago.

"They have been hurt by trying to bring something to market that was grander than necessary," said Mr. Schuler.

Sarah Singleton, vice president for deposit services at Sovereign Bancorp, Wyomissing, Pa., said she learned at a recent MAC member meeting that the Delaware launch may be on hold only until SmartCash negotiations conclude. "This is an exciting project," she said. "There are a lot of people working very hard to bring it to market."

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