The MasterCard-Visa rivalry is flaring up in the area of prepaid smart cards, though neither association has a product to show for it.

Even as the two organizations near the completion of a cooperative effort to set minimum technical standards, they are beginning to clash over who is ahead in developing systems based on computer chips in plastic cards.

MasterCard International announced on Sept. 8 that its first smart-card application would be a stored-value, or prepaid, card.

Since Visa has not made a similar "product announcement," MasterCard claims it is a step ahead. When apprised of MasterCard's decision, a Visa spokesman replied, "What product?"

MasterCard's direction is not a surprise since prepaid cards are gaining in consumer popularity and business strategists' attention all over the world.

MasterCard believes it can create an "open platform" allowing the cards to be widely accepted as a substitute for cash. Most current prepaid cards have only one use, such as in pay telephones or transit systems.

Research "shows that consumers like the idea of a prepaid feature, citing its added convenience and security," said Diane Wetherington, senior vice president of chip card business and marketing at New York-based MasterCard.

"Our prepaid card will also increase the types of locations where the cardholder can use his or her card, such as newspaper stands, rending machines, and parking meters, to name just a few."

That's about all MasterCard had to say about its product except that it will be able to hold multiple currencies like the competing Mondex concept (see page 12) and will be available "on a limited basis beginning in 1996."

Ms. Wetherington said in an interview that more details are known at the association's board level and will be disseminated as member banks set card-issuing plans. Patents are also pending.

She said Visa was behind in the product curve and had been focused mainly on setting technical specifications for the "electronic purse" type of smart card. She also feels Visa has not matched the commitment of the boards of MasterCard and its European partner Europay International, both of which have formally endorsed converting to chip technology.

Visa International officials yield no ground, saying MasterCard is jumping the gun.

"Visa is not as inclined to make an announcement without substantive products behind it," said Michael Nash, senior vice president of the San Franciscobased company's cash products division. "We expect to be in this market as soon as or sooner than anyone else."

When member financial institutions actually begin committing to chip cards, he said, "more will be inclined to put storedvalue applications on Visa products, and you will see that well before 1996."

Referring to the Visa-coordinated electronic purse specifications project, Mr. Nash added, "somebody had to step in and ensure there will be interoperability" - so that cards are readable in different types of terminals.

A separate Europay-MasterCard-Visa standards project, which just last week announced completion of the second of three phases addressing the chip and its interface with electronic terminals, "does not address the stored-value card at all," said Pete Hill, Visa's senior vice president of payment technologies.

Nineteen organizations worldwide, including Electronic Payment Services Inc. from the United States, are in Visa's working group. "MasterCard has been invited but chose not to join," Mr. Hill said.

Ms. Wetherington said MasterCard's 1996 target is "aggressive for a limited rollout."

First, she said, the EuropayMasterCard-Visa specifications must be completed by yearend.

"Then it will take at least several months for [equipment] vendors to incorporate the specifications into their product features and functionality, and card issuers would need six to nine months for systems and backoffice interfaces," she said.

"And it will take some time to bring consumers and merchants up to speed on how to use the product."

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