Diebold Inc. has announced plans to expand the concept of campus smart cards in a system to be introduced this fall at Pennsylvania State University.

In addition to the chip in the card, the Penn State version will carry two magnetic stripes and a photograph of the cardholder.

It will thus serve as an identification card for 100,000 students and faculty members, fill many administrative and record keeping needs for the school, and provide access to automated teller machines and other banking and payment services-from a number of participating banks.

The system, designed for 23 campuses statewide, goes well beyond the "closed system" or self-contained-network approach that was the line of least resistance for the introduction of smart cards. Such cards were usable only within a closed community, though in many cases it was relatively easy to include nearby retail merchants and financial institutions.

Banks have gotten involved in college smart card programs, including a pioneering effort at Florida State University. But participation has been limited to one or two banks at a time.

When the University of Pennsylvania began distributing smart cards with a depository component last year-another project in which Canton, Ohio- based Diebold was a technology supplier-students were able to link to accounts at PNC Bank and the University of Pennsylvania Student Federal Credit Union.

Single banks are involved in smart card programs at Guilford College in Greensboro, N.C., and the University of Michigan.

"We looked at what other schools were doing, and there was not a high participation rate at a lot of them," said Joel Weidner, manager of the Penn State ID card project.

"We are hoping that by offering multiple banks we will see a high participation rate, and use, so that the program will be able to generate enough transactions to sustain itself," said Mr. Weidner, the school's system director for business and finance.

Penn State hopes the picture on the card will make students and parents more comfortable about the level of security.

The chip on the front of the card will have a stored-value function. It will be readable at vending machines and laundry facilities, and cash value can be reloaded at special terminals.

One of the magnetic stripes on the back will be for use at ATMs and point-of-sale terminals, both on and off campus.

The second magnetic stripe will be for campus functions such as recreation and health-center activities and student voting.

"The financial institutions are very interested in the program, because it builds a relationship between them and the students," said Rafael Molano, special assistant to the executive team at Diebold.

"The university and the credit union see the chip card as a platform to develop other applications in the future," which could include bill payments and Internet access, he said.

Although the chip technology lends itself to putting multiple applications on a single card, some observers raise questions about the cost-benefit equation.

The multiple-application strategy "is a step in the right direction" to increase the acceptability of smart cards, said Lyn White, executive director of the National Association of Campus Card Users in Durham, N.C.

But the cost of a chip card is several times that of a magnetic stripe card-the latter is usually well under $1-and "what is being done on smart cards can be done on magnetic stripes more economically," Ms. White said.

The chips have the capability to deliver much more than an electronic purse, but it will take perhaps 12 to 18 months for more value-added, and potentially profitable, options to be available, Ms. White said.

But she added, "If they have good marketing, they will be fine."

For Penn State the challenge is signing up enough merchants and banks to make its system feasible and attractive to participants.

As an incentive to financial institutions, Penn State will allow them to market their products on campus.

No decision has been made on whether to limit the banks to offering checking accounts that can be tied to the chip cards; some may also be interested in linking to credit cards and other services.

A selling point to financial institutions is that they can enter the student market without having to issue cards on their own, said Wendy Buterbaugh, president of Pioneer Systems Inc., a unit of Penn State Federal Credit Union.

Off-campus merchants will have the debit card function in place before the electronic purse function.

"We will phase in the stored-valued application for the merchants at a slower rate, because we have to install different terminals," Ms. Buterbaugh said.

Plans are in place to install a smart card acceptance system at Beaver Stadium, where the football team plays, in 1999.

"Because our customer base is university campuses and financial institutions including credit unions, this is a natural migration of our product strategy," said Mr. Molano of Diebold.

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