Attempting to one-up Visa, MasterCard International said Wednesday that it has introduced a low-priced multi-application smart card with advanced cryptographic capabilities.

Visa International made a splash in September when it began offering banks a multi-application smart card for as little as $3 a card. Three banks have begun issuing that card: FleetBoston Financial Corp., Providian Financial Corp., and the First USA division of Bank One Corp.

MasterCard said its smart card is “priced under $3,” but did not name any banks that planned to issue it. MasterCard predicted that 15 million of the cards, which are based on the Multos operating system, will be in use by 2003, but that most of them will be in the Asia-Pacific region, where interest in the technology runs high.

Keycorp Ltd., an Australian technology firm, is MasterCard’s smart card vendor.

Christopher Rieck, vice president of marketing communications in MasterCard’s emerging-markets group, said U.S. banks will also issue the chip cards, which can support such applications as credit and debit functions, Internet authentication, e-ticketing, and e-couponing.

“We do have major commitments from some of the top banks in the U.S. to launch smart cards in 2001,” he said. “This is the first major announcement we’re going to be making in a string of really positive stories from MasterCard about chip.”

A Multos chip with 16K of memory is available today, and one with 32K will be available next year, MasterCard said. “We have long said that Multos is the most secure and robust platform available, and with this announcement, we can also say it’s the most cost-effective operating system available,” Mr. Rieck said. “There is pent-up demand for a low-priced smart card offering like this.”

Mr. Rieck said that a “major distinguishing factor” of MasterCard’s product is a cryptographic processor that makes public key encryption available. But Visa executives said their smart card, which is based on Java Card 2.1 and Open Platform 2.0 specifications, will also have that feature imminently.

Visa said it will have the PKI option available in June, and emphasized that its smart cards have a different architecture. "The MasterCard implementation using Multos requires public key support on all of their cards," said Denny Jensen, vice president of emerging technologies at Visa International. "We, with the Open Platform, do not require public key support on all of our cards. You can run the Open Platform and have a very high degree of security without that. We offer multiple options for the members."

Mr. Jensen said another significant difference between the programs is that MasterCard is working with just one smart card vendor, while Visa is working with seven major smart card vendors, including Gemplus, Schlumberger, and Oberthur. "Our members can select from the card manufacturer of their choice, and typically card issuers do have favorite card manufacturers," Mr. Jensen said.

Colin Baptie, a spokesman for Visa, said MasterCard’s smart card entry is “good news for the industry” as a whole. “We’re happy they’re following our lead in working with smart card providers in lowering the cost of the chips.”

MasterCard says it already has 40 member banks around the world issuing 30 million chip cards, but those cards are less advanced than the ones it has just introduced with Keycorp. With the earlier cards, the chip supports only debit and credit functions, not multiple applications. Some of the MasterCard cards on the market are Mondex cards, which use the chip as an electronic purse.

In the United States, American Express Co. has had the most success to date in distributing smart cards. More than five million Americans carry the Amex Blue card, according to a survey conducted this fall by Brittain Associates Inc. American Express will not disclose numbers.

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