Gemplus, the French manufacturer of smart cards, has signaled its readiness for growth in the United States by filling a key leadership post at its Gaithersburg, Md., subsidiary.

Dan Cunningham, a vice president who had been acting head of Gemplus Card International Corp. since July 1992, was named president and chief executive officer in mid-August.

The promotion came at a time when the advanced card technology, which involves placing a microcomputer chip within the plastic, seemed at last to be jelling in the United States.

Smart-card advocates have long contended that the chip's memory capacity and durability make it superior to the magnetic stripe that has been standard on bank cards since the 1970s. But the banking industry's huge investment in magnetic cards has made it slow to consider an alternative.

All Eyes on MAC

U.S. bankers are closely watching a plan by MAC, the electronic banking network owned by CoreStates Financial Corp. and three other super-regionals, to issue smart cards in a prepaid, or stored-value, system.

Gemplus is supplying those cards, still in a test mode. The cards have a given value stored in the chip. With each use in a vending machine or other terminal, the amount is debited until the card must be reissued or replenished.

"The U.S. market is probably between 18 and 36 months away from some very substantial activity." Mr. Cunningham said in a recent interview.

Pivotal Role

That is not a long time in the world of complex development and implementation programs like MAC's, dubbed Moneypass. Mr. Cunningham said enough such projects are in the pipeline to ensure a future for smart cards and the companies supplying them.

Given that outlook, Gemplus did not want to leave its U.S. chief executive's slot vacant much longer.

"Dan has been the driving force behind the significant expansion of Gemplus' U.S. operations in 1992 and 1993," said Marc Lassus, founder and CEO of the parent, Gemplus Card International, in Gemenos, France.

"Dan's experience in the U.S. smart card industry and vision of the market's future direction puts the U.S. company in an ideal position to capitalize on the projected growth of the U.S. market."

Limited Market

By any reckoning, the U.S. remains a far cry from France, where the technology was invented and where the banking and telephone industries, among others, have fully adopted smart cards.

Gemplus and several French competitors have tried to use their success as a springboard to the U.S. and other export markets.

Gemplus was founded in 1988 by engineers from SGS-Thomson, the French electronics company, with some financial backing from that firm. Mr. Cunningham said it is projecting $130 million to $140 million in revenue this year.

Home Run Needed

It has more than 600 employees overall and is producing 12 million cards a month, but only nine people are working here under Mr. Cunningham and Gemplus has yet to manufacture a smart card in the U.S.

Mr. Cunningham contends it will take only one big program to open the floodgates, likely making it worthwhile to build an American factory to complement facilities in France and Germany.

"If MAC, for example, succeeds at converting its entire card base to smart cards, that will be a very big step forward," the executive said.

Mr. Cunningham, 48, was born in Michigan, raised in Texas, and earned bachelor's and master's degrees in business administration from Texas Tech. He joined Gemplus Card International Corp. in April 1992, and found himself running the company three months later when Joseph Schuler resigned as president.

Familiar with Technology

Mr. Cunningham was no stranger to smart cards. Before joining Gemplus he was U.S. sales manager of Microcard Technologies Inc., the U.S. smart card unit of Groupe Bull, the French computer giant.

Microcard started in the 1980s with ambitious marketing and manufacturing plans for the U.S., but had to scale them back as the smart card market was slow to develop. Bull focused its attention on the burgeoning French market, where the banks completed their conversion to the technology at the end of last year.

Prime Candidates

Earlier in his career, Mr. Cunningham worked at Recognition Equipment Corp. and NCR Corp. As a Gemplus vice president he continued to reside in Dallas, where Microcard and Recognition are based, but as president he will be based at headquarters in Gaithersburg.

He said his small sales force has its sights on several market categories, including financial, government, health care, transportation, telecommunications, retailing, and gaming.

Despite its nimble reputation and its claim to being "the recognized leader in the smart card industry" after only five years, Gemplus has kept its distance from the one event that could galvanize the U.S. market.

It has not joined the Smart Card Forum, an interindustry group that aims to promote "open system" standards and otherwise clear away obstacles to adoption of the technology.

Citicorp played a key role in pulling the forum together, and its two dozen initial members include several financial institutions, both bank credit card associations, AT&T, IBM, Apple Computer, and Microsoft.

Key Players Missing

Perhaps not coincidentally, the joint venture that owns MAC - controlled by CoreStates, Banc One Corp., PNC Bank Corp., and Society Corp. - also has stayed away from the Smart Card Forum. Danyl Corp., the Moomstown, N.J., terminal maker for the MAC project and an exponent of "open systems," also is not a member.

Industry observers such as Ben Miller, publisher of the Washington-area newsletter Personal Identification News, have said the forum will suffer without such key players.

After almost two years of getting ahead of the market, "we're not in a position to join without exposing confidential information and without devaluing the substantial investment we have made," Donald Gleason, manager of the MAC stored-value program said in a recent issue of Bank Network News.

Joint Venture

Gemplus does have a foot in the door, thanks to Verifone Inc., the California-based point-of-sale terminal manufacturer, which is a forum member. Gemplus is organizing a smart-card joint venture with with Verifone, called VeriGem.

Mr. Cunningham is not unalterably opposed to membership. And he can't afford to ignore its lineup of heavy hitters.

"They have defined their ambitions and have worthwhile goals," he said of the forum, "and we anticipate becoming active in the organization."

Cruise Line Accepts Card Payments by Phone

Royal Caribbean Cruise Line, Miami, has begun accepting credit card payments for individual bookings by telephone. The move reflects a greater level of comfort with relatively large-ticket purchases by phone, given recent efforts by credit card providers to improve security against fraud. Cruise ticket cost at least several hundred dollars each.

"This will greatly enhance the way we deal with credit card payments," said Rod McLeod, Royal Caribbean's executive vice president of sales, marketing, and passenger services. "We think it speeds up the transaction, makes it easier to close a sale, and better serves the agent and the agent's clients."

Since the program will confirm to the card companies' telephone-authorization standards, the universal credit card form will no longer be needed.

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