Merchants may like the idea of smart cards in theory, but in practice it's a different story.

The lack of standards and the high cost of upgrading the current payments infrastructure are two of the merchant community's biggest concerns.

"Currently, there are no standards," said Joseph Schuler, senior vice president of the stored value systems group at National City Corp.

"Each smart card manufacturer has its own card operating system and these systems are incompatible," he said at Faulkner & Gray's Debit Card Forum here early this week.

This lack of standards has merchants wary of buying or upgrading their point of sale terminals. Many say they'd rather wait until an enforceable standard is published.

Even those retailers who are willing to take a chance on equipment upgrades even before standards are set say they are concerned about costs.

While terminal manufacturers and merchant-acquiring banks say an equipment upgrade can cost as little as $50, retailers say that just isn't so.

"I went into the exhibit hall looking for a $50 upgrade and I couldn't find one," said Hank Bray, special projects coordinator for Exxon.

"My experience has been that we're talking about a capital expenditure of $500 to $1,000 per card reader," continued Mr. Bray. "That means $400 to $500 million for a complete upgrade" for all Exxon locations.

Mr. Bray also expressed concern about processing fees, which can cut considerably into petroleum companies' already-low profit margins.

"Financial institutions say the petroleum market is important," he said, "yet they're not paying enough attention to the fuel industry's costs and profits."

He said such lack of consideration may kill card payment options at gas stations, citing one chain in Florida that refuses to accept cards.

Instead, the chain places automated teller machines on the premises, so customers can withdraw cash on site. That way, he said, the customer - rather than the merchant - pays the transaction fee. Because it is not paying transaction fees, the chain is able to charge less than competitors for gas.

Exxon is also concerned about educating its customers to use the new smart card technology. Customers accustomed to purchasing gas with a simple swipe of their card will have to be retrained to leave the chip card in the terminal. Mr. Bray said he believed other merchants would share this concern.

He questioned whether high-tech smart cards are really necessary for merchants to perform effective customer loyalty programs, citing S&H Green Stamps as a perfect low-tech method.

"If we want to reward the customers who use us most frequently, we don't have to wait for the smart card," he said.

Mr. Bray did not discuss one much-touted merchant benefit of accepting smart cards: bigger tickets. But other speakers did.

Minna Tao Lee, vice president of the smart card management group at Bank of America, cited studies that showed a 5% to 60% sales lift when a consumer pays with a smart card rather than cash. She did not cite figures comparing purchases made with smart cards and credit cards.

She also had concerns about the cost of equipment upgrades, not only for merchants but for banks as well.

"It costs about $3,000 to upgrade an (ATM), not to mention the software upgrade and the security enhancements," she said.

"Costs are substantial and revenues are uncertain, so I would recommend that you plan your smart card rollout very carefully."

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