Cybermark LLC has become the smart card industry's big man on campus.

The Columbus, Ohio, company, which is one-third-owned by Huntington Bancshares, has developed as its specialty smart card systems for colleges and universities.

These self-contained community systems-"closed systems" in industry parlance-could be a bridge to the more mass-market, open systems toward which promoters of the advanced payment technology are pointing.

With just 30 employees, Cybermark has been a veritable juggernaut, working with various vendors and partners to install systems at six schools in the United States and Canada. It has issued 125,000 cards to students and faculty members.

The systems cost $100,000 to $1 million to install. Their payoff comes not just from replacing cash at on- and off-campus points of sale, vending and copying machines, and laundries but also in more efficient accounting, financial aid, library card, and other administrative systems.

The cards also verify student identification and provide access to dormitories and other secure areas.

The current U.S. installations are at Florida State University, with roughly 40,000 cardholders; Villanova University in Pennsylvania, with 15,000; and three with 2,000 each-Guilford College in North Carolina, Skidmore College in New York, and Ohio Dominican College.

Cybermark has just rolled out a 60,000-card program at the University of Toronto and says it has contracts with five more colleges to be announced next year.

James B. Graham, 44, Cybermark's chairman and chief executive officer, says he is convinced campuses are where smart cards will take hold in the United States.

"Our underlying mission was to gain a foothold in this industry," Mr. Graham said. "The primary focus of Cybermark has always been and remains smart cards-how they fit into not just stored value but multiple applications.

"The college campus is the perfect example of this," he said.

Mr. Graham joined Cybermark in October 1996 from FaxLand Corp., a facsimile technology company he founded in 1987. He was president of Cellular Radio Corp., McLean, Va., from 1984 to 1987 and a product manager at Western Union from 1976 to 1984.

Cybermark got its start in 1993 as a division of Student Loan Marketing Association. Sallie Mae had been working since 1992 with Battelle Memorial Institute of Columbus, Ohio, to develop a smart card system for college campuses; it spent $15 million to $20 million.

In 1996, Sallie Mae and Battelle, a leader in high-technology research and development spun off a one-third interest to Huntington Bancshares, also of Columbus, as an equal owner with them. The Battelle headquarters and nearby Ohio Dominican College were their first live showcases.

This spring, Cybermark beefed up its development capability by investing $1.5 million in a strategic partnership with the Card Application Technology Center at Florida State in Tallahassee, which is led by Bill R. Norwood.

Mr. Norwood, who became Cybermark's vice president of business development, and his 15-person team had been working to move the Florida school from magnetic stripes to chips for its products. The college population is young, adaptable, and more technology-savvy than average, experts say.

Marketers say that students, if captured at a time when they are beginning their lives as consumers, can develop lifelong loyalties to certain products and services.

Luke A. Weinstein, executive vice president of Product Technology Inc., Middletown, Conn., said universities form "a tremendous market and it needs an organization like Cybermark that is dedicated to that business."

Product Technology created Smart City, which provides the back-end processing systems for Cybermark's smart card. The Smart City operating platform runs with the help of several vendors, such as Debitek Inc., Verifone Inc., Gemplus Group, and others.

"They have signed more contracts and put out more cards than anyone else," Mr. Weinstein said. "I also think it will be of tremendous value long-term for building smart card infrastructure in the country."

"We believe in the fact," said Richard J. Darwin, manager of Battelle Institute's digital transactions group, "that the university market is going to be one that will lead the rest of the country toward the wider acceptance of smart cards. Smart cards are a technology that the banking industry and retailing and others who want to be in the transaction processing world are going to start to adopt."

One reason smart cards gain quick acceptance on college campuses is that they have a captive audience of students, staff, and faculty.

"The reason we focused on higher education as a target market is that it seemed to have the early adopters of this technology," Mr. Graham said. "If the administration decides that the students are going to carry a smart card as their student ID, they all carry it."

He said MasterCard- and Visa-sponsored trials like the one on New York's Upper West Side go more slowly because "the consumer has the option of continuing to pay cash and doing other things."

The campus programs have had varying degrees of success. Private schools with wealthier students, Mr. Norwood said, tend to have more successful smart card programs. Students at public institutions "have less money to put into the system, and all of that is a derivative of what happens with the card."

Despite skepticism about smart card profit potential, Cybermark contends there is money to be made in university programs. It earns revenue by selling equipment, processing transactions, and retaining the float on unspent funds. It should also benefit by building scale.

"As we do more and more universities, the volume builds up, and as we install more and more equipment on the campuses, our ability to buy the equipment cheaper builds up as well," Mr. Norwood said. "There are lots of systems integration opportunities to make money." There is more to the economics than "the cost of the smart card piece itself."

Mr. Graham said Cybermark will end 1997 with $3 million in revenue, compared with nothing in 1996. Next year it expects $10 million.

Cybermark is in synch with the financial industry's thirst for customer information. Although the company says it segregates cardholder names, it tracks purchases based on gender, race, age, and time of day.

"We know what time of day these transactions take place," Mr. Norwood said. "In other words, do the ladies purchase Cokes in the morning or the afternoon?"

Bank partnerships are another key component of the program. In addition to Huntington, Cybermark works with First Union National Bank, Barnett Bank, PNC Bank, and SunTrust Bank to offer student depository and related banking services.

"Our platform is built like a puzzle: There are parts to it, and without all of the parts in place, the program does not function as well," Mr. Norwood said. "The bank part allows certain things like financial aid distribution to work much better and allows other things that are real savings to the campus."

Without the banks, the smart card system "just becomes a nice toy." Bank participation makes it "a Cadillac."

Mr. Norwood said bank interest in smart card programs has escalated in recent years as they have eyed marketing opportunities to the current generation of college students.

"The real issue is in testing new ground," said William M. Randle, executive vice president of Huntington Bancshares. "We're looking at colleges in different parts of the country. It ties into the concept of direct access of financial services through the Internet and ATMs."

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