Motorola Inc. has won one of the prized smart card contracts up for bid in the United States.

Working jointly with ERG Group of Australia, Motorola beat out International Business Machines Corp. to develop TransLink, an integrated payment system spanning 26 mass-transit agencies in the San Francisco Bay area.

The ERG-Motorola team, which has proven itself in similar projects around the globe, will get $114 million to $157 million, depending volume of use by riders, to install the system and operate it for 10 years.

A six-month trial of TransLink is to start in the fall of 2000, with full adoption scheduled for 2002.

Financial institutions, in keeping with their reputation as laggards in embracing smart cards, were not in either of the two groups of finalists. Bank of America Corp., which was originally teamed with Motorola, and Citigroup Inc., part of the IBM consortium, dropped out during negotiations, citing a weak business case.

Motorola is bringing in SPS Transaction Services Inc., a unit of Associates First Capital Corp., for transaction processing and plans to rely on small software firms for implementation help.

Russell Driver, TransLink project manager at the Metropolitan Transportation Commission in San Francisco, said his initial hope is for banks to install a merchant network and operate an electronic cash application on the cards. But the banks saw the idea as costly and risky.

He expects more interest from banks "once we prove that we can put a card base together of meaningful size," Mr. Driver said.

A Motorola spokes- man said the company is still in talks with Bank of America, which could lead to its involvement after the pilot phase. Bank of America declined to comment.

Six transit agencies will be in the pilot test, operating everything from buses and trolleys to light rail. They are AC Transit, BART, Caltrain, Golden Gate Transit, San Francisco Muni, and Valley Transportation Authority in Santa Clara.

From 5,000 to 15,000 cards, made by Motorola, are to be sent to riders during the test. Each card is to include a tiny antenna to enable contactless operation, a function that is seen as essential for high-volume transportation settings.

Riders will have the option of reloading their cards at vending machines in rail stations, at point of sale devices, at selected retailing sites, and in transit agency ticket offices.

Riders will also be able to sign up for an auto-load feature that automatically transfers value from their bank accounts or credit cards to the TransLink cards whenever the stored value dips below a certain amount.

Francois Dutray, vice president and general manager at Motorola's worldwide smart card solutions division in Schaumburg, Ill., said the TransLink smart card "will provide a springboard to help drive the global adoption of a multitude of new value-added smart card applications."

Mr. Driver said he does not expect banks to be the first to jump at adding their services to the cards.

A GTE Corp. telephone calling application is anticipated after the pilot test, and parking and toll payments are suitable add-ons, Mr. Driver said.

"We will build significant critical mass by doing things that are much more focused on the market we deal with as transit providers," he said. "We're not looking right now for a catchall payment product."

Michael Dinning, chief of infrastructure protection and operations at the U.S. Department of Transportation, said transit agencies seeking banking partnerships might have to start with a hybrid card that holds a chip and a magnetic stripe, as in First Union Corp.'s Washington Metro program.

"The Washington step was much more modest," Mr. Dinning said. Banks may have viewed the San Francisco effort as requiring "too much of an investment."

Daniel M. Fleishman, principal at Multisystems in Cambridge, Mass., said the San Francisco-area decision to proceed without a financial institution might spur transit agencies to start smart card projects without waiting for banks to supply an infrastructure.

If anything, he said, banks "may piggyback on transit. It's a change in thinking."

He cautioned that the project has a long way to go and that it will not be easy to keep the 26 participating agencies happy.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.