A trip to one of the capitals of Europe is all that it takes to understand the meaning and possibilities of smart cards, but traveler beware: The Europeans don't exactly have all the answers.

From a North American vantage point, one can get a different impression. Computer chips in plastic cards were invented over there. Banks, telephone companies, and other organizations in France, for example, the cradle of smart card innovation, have had a 15- to 20-year head start in experimenting with and putting these systems to work. The fruits of those labors were evident two weeks ago in Paris at Cartes '99, a major event on the international calendar of the smart card trade. An estimated 12,000 people visited an exhibition of offerings from 270 companies. A smaller number attended three full days of seminars that reflected industry realities in terms of dynamism, optimism, and a level of maturity that would have been lacking even two or three years ago.

Yet a closer look and hearing revealed that old controversies are simmering. Meanwhile, typical of many a high-tech endeavor, the Internet and its demands for speed and flexibility have required rethinking and repositioning, causing a good deal of jostling among competing suppliers and their customers.

It remains easy for the technology providers to sneer at the United States and its bankers' lack of urgency about upgrading to chip cards. But Europe, too, offers plenty of reasons to grumble. For all of that continent's advances, including a growing country-by-country banker consensus to move to chip with deliberate speed, adoption on the mass-consumer level is spotty, and there is much unfinished business in the crucial area of technical standards.

Marc Lassus, chairman and co-founder of Gemplus, one of the French vendors in the forefront of the business, found himself having to defend his company's projection that 6 billion smart cards would be shipped in 2003. The idea that this statistic - four times the 1999 estimate - could approach the number of people who populate the planet might normally be accepted and celebrated unequivocally by a friendly audience. For now it just seems a bit far off and hard to contemplate."There is reason to be very optimistic," Mr. Lassus said. For one thing, China, the most populous country, has big, government-promoted smart card plans. It is already Gemplus' largest market, followed by the United Kingdom, where a national decision was reached last year to convert more than 100 million debit, credit, and charge cards to chip.

Mr. Lassus also sees great potential in the mass transit market - a competitor, Motorola Inc., was proudly demonstrating the automated fare system it is installing in Berlin and taking to San Francisco, among other places - and in wireless telephones. The latter are prompting a smart card frenzy in Europe where GSM, Global System for Mobile communications, is the prevailing cell-phone standard. It requires a chip called a SIM, or subscriber identity module, to authenticate the mobile subscriber, and SIMs and smart cards can go hand-in-glove.

"We are getting way beyond" the simple memory cards that are routinely required in France, the United Kingdom, and numerous other countries for pay-phone access, Mr. Lassus said. "A two-megabyte SIM card is coming in the future. The banking industry is waking up, so you see a convergence. It's not just telephony any more."

Mr. Lassus said, "There are many standards initiatives, some positive." But in part because there are many, "smart cards are still not a mature industry."No one was more forceful - or exasperated - on that point than Lutz Martiny, an executive at Microelectronica Espanola of Spain and chairman of the Brussels-based trade association Eurosmart, to which Gemplus and many of its competitors and systems allies belong.

He pointed out that at least three-quarters of the smart cards delivered by manufacturers go to the GSM or prepaid-telephone markets, meaning that the industry is not finding the kinds of "killer apps" and multiple-service card opportunities that have long been discussed and anticipated.

"What do we have to do to become an industry?" Mr. Martiny said. "We have to put together all the concepts and all the associations including Eurosmart and put all on one open platform."

Mr. Martiny put up a slide listing various programs with millions of cards in circulation: the electronic purses Chipper in the Netherlands, Proton in Belgium, and Geldkarte in Germany; the Sesame Vitale and Gesundheitkarte health-care cards in France and Germany, respectively; transit card systems in Paris, Hong Kong, and San Francisco. They are incompatible with one another.

Likewise, he listed the interests with a stake in a more cohesive technical framework: card makers, semiconductor suppliers, telecommunications companies, government agencies, banks and their associations, software houses, research institutions, and user groups. He offered Eurosmart's offices to promote a standards discussion among all constituencies, saying this jumble is more to blame for "the smart card market not flying [than] because the consumer didn't want it."

"I think the smart card is the tool for the next century," Mr. Martiny said. "But we have to do something to make this a mature industry." Estimating its current annual revenues at $20 billion, he added, "That's nothing. Somebody could buy us and impose a standard on us. I'd prefer to have us discuss a standard."

Malcolm Williamson, president of Visa International, suggested that Global-Platform Inc., a company launched in October by Visa and other "open standard" advocates, aims to accomplish exactly what Mr. Martiny is longing for."Until now, there has been no single organization focused on dynamic, multi-application smart cards for various operating systems and cross-industry applications," Mr. Williamson said. "It will take on the challenge of aligning the smart card infrastructure across existing technology and multiple operating systems … . And it will bring service providers together to define a common industry mandate - an ingredient that is essential to building smart card momentum."

Visa has also championed CEPS, the Common Electronic Purse Specifications for stored value cards. Visa has even cracked the competitive ice with MasterCard International and its Mondex electronic cash subsidiary, agreeing in an Oct. 27 statement to pursue "standardized back-office systems and processes" to simplify member banks' operational decisions and strategic choices.

But sparks still fly. GlobalPlatform gained credibility when archrivals Microsoft Corp. and Sun Microsystems Inc. - proponents, respectively, of the Windows for Smart Cards and Java Card operating platforms - both joined. Neither Mondex nor Maosco Ltd., the custodian of its Multos multiple-application operating system, have come in, though MasterCard is said to be considering it.

The sticking point on CEPS, possibly irreconcilable, is that it requires auditability or accounting of virtual cash transactions. Mondex contends that fully accounting for every little card-to-card transfer of funds would ruin the economics.

"It can't be cheaper than Mondex, and that is why we won't ever join CEPS," said Michael Keegan, chief executive officer of London-based Mondex International Ltd. He said that "the world is big enough for two here" but added, "We are cost-effective and globally interoperable. CEPS want to achieve that. We can now."

French banks, though they put chips on debit and credit cards years ago, are only now testing stored value in earnest - in three trials in as many cities. One is Mondex; the others are, alliteratively, Moneo and Modeus.

Armand Linkens, managing director of Brussels-based Proton World International, which includes Visa and American Express Co. among its ownership, is squarely pro-GlobalPlatform and pro-CEPS.Mondex has contributed to the market's maturation, he said, "but it hasn't been able to deliver," meeting resistance in continental Europe where electronic-purse auditability is favored. "I would prefer that Mondex participate in the infrastructure and be successful." He suggested that Mondex "have an audited system alongside the unaudited. That is the way the whole world is going."

As for GlobalPlatform, he said, "Isn't it a pity that Multos is out of line with the approach others agree on? I would advocate that Multos get into that infrastructure approach that the market is taking."

Mr. Linkens said Europay International, MasterCard's European affiliate, is a "strong supporter of CEPS." On display at Cartes '99 was Europay's CEPS-compatible Clip multicurrency electronic purse. Herve Kergoat, the Europay executive in charge of that effort, said it "demonstrates the commitment of key industry players to work together to achieve true purse interoperability."

"The real definition of an open standard is when the competition is using it," Jon Prideaux, executive vice president in Visa's European Union organization, said in an interview after the conference. Europay validates CEPS in that way, he said, and he views Clip, not Mondex, as the real competition for Visa Cash in Europe.

"This is not a technical debate," Mr. Prideaux added. "We want to have a better CEPS-compliant product than they."

Nick Habgood, CEO of the Maosco consortium, which includes American Express and the Discover Card organization as well as MasterCard and Mondex, reflected on the difference a year can make."One year ago, our concerns included whether the technology would deliver, security, the competition, and would anybody use it," Mr. Habgood said. "Now it is, 'Can we get enough Multos chips out of the factories to meet the demand?' " as 30 million such cards are projected over the next year, up from 2 million by yearend 1999.

Mr. Habgood identified PKI - public key infrastructure - technology, the data encryption systems that scramble messages and authenticate users of on-line networks, as the "killer app" of the moment. He said this is "overtaking payment as the most popular" among Multos applications and "will be one of the main engines driving the take-up of smart cards in the next few years."

Among the vendors embracing that proposition was chip card pioneer Bull Group, which, aside from putting security capabilities into its products, is spearheading a proposed standard called Multi-Application Secure Smart Card, or MASSC. Bull worked on this with Oberthur Card Systems, Philips Digital Video Systems, STMicroelectronics, the Belgian payments association (and Proton co-owner) Banksys, and Telecom Italia Mobile. MASSC specifies "the hardware for secure multiple applications that banks have been waiting for," said Bull spokesman Bill Bradley.

Now in "working prototype" form, MASSC is "the only secure operating platform available today," said David Levy, CEO of Bull Smart Cards and Terminals. Its 32-bit RISC processor quadruples memory capacity, and it is readily compatible with Windows, Java, or Multos. Of course, it has to be marketed, and Mr. Levy expressed confidence that competitors like Gemplus and Schlumberger would climb aboard.

Bull also introduced iSimplify, described as "the world's first Internet smart card" and a "personal portable portal" for Net access and identity verification. That "first" billing irked Mr. Lassus of Gemplus. In a panel discussion he berated Mr. Levy, who formerly worked at Gemplus, saying: "You know it is not true."

Harmony reigned in unlikely places.A joint discussion by Philippe Goetschel of Microsoft and Patrice Peyret of Sun Microsystems' consumer and embedded unit yielded no Windows-versus-Java fireworks. They so calmly reviewed recent accomplishments - Cartes '98 was where Windows for Smart Cards was unveiled to the world, and Cartes '96 was Java Card's opening - that someone in the audience was moved to ask why.

Mr. Peyret turned that around, saying the audience was far smaller and quieter than the one that packed a similar session at the Cardtech/Securtech conference last May in Chicago.

Mr. Goetschel said the companies' "design points are very different," like Renault versus Citroen. (He did not say which was which.) "We share a vision of the industry," and "at this point we both have more to gain from seeing the overall industry grow."

Mr. Peyret nodded agreement.

A session headlined by Sandra Alzetta, senior vice president of electronic commerce in Visa's EU region, and Michael Harris, senior vice president and head of MasterCard's chip business, was also devoid of tension. Ms. Alzetta made a convincing case for smart cards' role in securing and promoting electronic commerce, and Mr. Harris endorsed just about everything she said.Ms. Alzetta said major immediate concerns are cardholder disputes and chargebacks, a function of both on-line fraud and customer-service deficiencies. "We need authentication technology to reduce fraud, and an excellent way of assuring authentication" is SET, the Secure Electronic Transaction protocol, which has fallen flat in the United States but is gaining momentum overseas. Ms. Alzetta praised Cyber-COMM, a French banking and technology consortium, for its "excellent and innovative" initiative to combine SET with smart cards and inexpensive card readers for customer identification.

Mr. Harris added, "There are smart card and non-smart-card options, but we believe SET will come into its own" as e-commerce grows and fraud poses a greater threat to profitability. "SET is the best available protocol" in that it "solves all problems end to end."

Cartes, which is produced by Charles Copin of the consulting and publishing firm Analyses & Syntheses, held its fourth annual Sesame Awards, with Visa listed as sponsor. Attracting 58 entries in eight categories, the program is more elaborate than that of Cardtech/Securtech, where there are only a couple of "application of the year" awards. The judges included Mr. Copin, Mr. Martiny, and several journalists.As best banking application, Proton won jointly with Gemplus for the GemProton CEPS electronic purse. Gemplus was also cited for "best technological innovation" with its SmartX programming platform and for the Sedodel infrastructure in the e-commerce category.

Bull affiliate Xiring won the identification/security prize for the Xi-Sign digital authentication system, Novacard of Germany was the health-care winner for a card with a fingertip sensor, Unicom Consulting of Finland's uniLoyalty won in the loyalty category, and a contactless card system from Ask of France took the transportation prize.

The "best of the best," or best of show, was Oberthur Card Systems' Mobile Commerce SIMphonIC payment technology for wireless phones. It also topped a Schlumberger product in the GSM category and was a nominee for best technological innovation.

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