Mellon Network Services is going into smart card training with a pilot test at Fort Knox, Ky.

The transaction processing unit of Pittsburgh-based Mellon Bank Corp. is working with the Treasury Department to provide a stored-value system for 11,000 recruits at the Army basic training base.

Recruits will use their $200 cards to buy goods and services at the post, which also protects the national gold depository.

Amid a maze of display booths at the annual Cardtech/Securtech conference here, Mellon vice president Linda T. Brown revealed the processor's plans. A formal announcement is scheduled June 11, the official launching date.

Ms. Brown said the project grew out of Mellon's status as card processor for the Treasury's Financial Management Service. "When they wanted to test smart cards, they came to us," she said.

The Treasury has also called on First Union Corp. for a Visa Cash pilot at its Fort Leonard Wood training base in Missouri. The agency wants to "learn as much as we can about all forms of electronic money," said Gary Grippo, its program manager for electronic cash.

"We're contemplating a number of pilots," including a test of the Secure Electronic Transactions protocol for credit card payments over the Internet, he said.

Mr. Grippo likened the advent of electronic cash to the "major shift in the U.S. payment system" fueled by credit cards, automated clearing houses, and automated teller machines more than 20 years ago.

With stored-value cards, the Army can streamline advance payments to recruits before their direct deposit accounts are established. The technology can help the Treasury fulfill its mandate to deliver all payments electronically by 1999.

The one-year Fort Knox pilot will cost the government less than $500,000, the same as the First Union project.

Mr. Grippo noted some differences in the two systems. Mellon's is licensed from SmartCity, a consortium of companies that developed the Florida State University campus card, and it requires a personal identification number for transactions. Visa Cash does not. Merchants pay a discount fee for Visa Cash but not in Mellon's system.

SmartCity cards are already in use at Parris Island Navy base and on the aircraft carrier Yorktown.

Mellon is getting its first experience as integrator and project manager of a stored-value product and anticipates a bright future, said Ms. Brown. The company wants to offer clients "integrated debit, credit, and stored- value processing to a single settlement point."

Mellon may join forces with the bank card associations and their brands, she said, but "it's difficult to make anything work in an open system. You have a lot more control in a closed environment."

In other news, NEC Corp., the Japanese electronics company, is entering the smart card business. Munekazu Suzuki, general manager of the microcontroller division, said, "We will be one of the top three suppliers by the year 2000."

Bull Group of France would produce cards at $1.50 each for merchant loyalty programs. The cards, including a purse for transit applications, would comply with ISO (International Standards Organization) standards, unlike most memory cards now on the market.

NEC said its cards may give merchants the needed incentive to install terminals that read smart cards. Merchant resistance is considered one of the biggest barriers to building a smart card infrastructure.

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