After years of struggling to get its advanced card technology into a consumer payment system, Drexler Technology Corp. has found a taker.

Ironically, the card will have its first such lest in one of the world's more unsophisticated economies.

The Mountain View, Calif., company said a financial institution in a former Soviet bloc country has ordered 20,000 Laser-Cards, which are to be delivered this month.

Drexler did not name the institution or the country, in deference to the distributor that signed the contract and is planning its own announcement with more details in January.

Drexler did say that the card will be used in a prepaid program. Value will be stored in the card and debited with each use.

The company has been trying to persuade bankers and others that its patented optical encoding system is superior to both the existing magnetic stripe standard and the highly touted smart card systems, which have computer chips embedded in the plastic.

Prepaid smart cards are widely used in the french and Japanese telephone systems, and the MAC regional automated teller machine network in the United States is testing a card to which users can add value at ATMs.

To Store Records

The LaserCards, capable of holding the equivalent of 2,000 pages of information, have been used mainly for records storage.

The cards can replace voluminous files in such areas as health care and car maintenance. Drexler is making a determined effort to have the LaserCard become the United States' national health care card.

Some of the storage capacity can be devoted to security, incorporating high-level identification techniques like finger-prints. Drexler has been hoping this capability would help sell the LaserCard to financial transaction networks, which cannot get such security with magnetic-stripe cards.

Starting from Scratch

Failing to make inroads into established payment networks in the industrialized countries, Drexler found an opening where banking systems are being created almost from scratch, and where consumers bear the risk of carrying large amounts of cash to keep up with rapid inflation.

"The whole economy [in the former Soviet Union] is in a state of flux," said Jerry Drexler, president and chief executive officer of Drexler Technology. "I think that may be the principal reason for starting to develop this system."

In the emerging economies, telecommunications are inferior, he said, which argues for an off-line, prepaid card system.

"They can jump to the newest technology," he added. "I really think this will spread throughout the entire Soviet bloc."

Bank technology experts in the U.S. discounted the LaserCard long ago. Paul F.P. Coenen, an electronic-banking consultant in Cumming, Ga., said the cost of converting to the technology - even assuming that the cards could be efficiently read and updated in transaction terminals - would be prohibitive.

Jerome Svigals, a consultant and card-security expert based in Redwood City, Calif., said the drawbacks include cost, safety of data, and maintenance capabilities - especially in Eastern bloc countries.

He said the machines that read and write information on the optical card are more expensive than other devices. And the LaserCards are susceptible to damage that could erase information, he said.

Mr. Svigals also raised a concern about having so much information stored in one place, unconnected to a central data base. He prefers smart card systems in which information is updated each night in a central computer.

"It really raises serious questions about cost, reliability, and serviceability," Mr. Svigals said. "People [in the U.S.] don't think it's very practical."

Drexler answers critics by emphasizing security and durability - the digitized memory is impervious to magnetic or electrostatic fields. The LaserCard's unit cost is $3 to $4, 10 times that of magnetic-stripe cards and slightly above the volume prices French banks reportedly pay for chip cards. Advocates of smart cards say they will pay for themselves through reduction in fraud and credit losses.

For Salaries, Too

Drexler's prepaid cards are expected to be used at hotels, gas stations, shops, super stores, and restaurants, and for taxes and utility bills. Drexler anticipates workers in the undisclosed country will have their salaries recorded onto their cards.

The card will store a permanent record of transactions, deposit balances, and fingerprint templates of each family member entitled to use it.

Before funds are paid from the optical memory card, the user must place his or her finger on a screen to compare with the template. Drexler says the card can also accommodate palm prints, voice prints, or other "biometric" security methods.

If the card is lost or stolen, it is useless without the fingerprint of the owner, who can be issued a replacement card with the proper monetary value.

Drexler believes that the off-line, instant verification is more secure than telephone procedures used in the United States. Mr. Svigals agrees, but suggests the cost of the read-write machine is too high for banks.

To add another level of security, the LaserCard payment cards are manufactured with special data codes permanently inscribed so that the cards will function only in designated terminals - and not in all commercially available reader/writers.

Green, silver, and gold cards will represent different value and privilege categories.

Distributors Write Software

Drexler's distributors, known as value-added resellers, write software and develop systems to use the optical card technology. Drexler manufactures the cards as well as the card-reading and processing terminals.

A second distributor has previewed the cards to another Eastern bloc country, which may also use it, Mr. Drexler said.

He said he came up with the idea for a laser-optical storage card in 1976, when the first personal computers were emerging. He filed the first of 40 patents in February 1981, and said he has spent $65 million on the technology's development.

Mr. Drexler's factory can produce 25 million cards a year, and he says a magnetic stripe can coexist on the LaserCard.

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