The Smart Card Forum took a look backward this week.

Holding its annual meeting in San Francisco, the group broke from the pattern of high-tech conferences by devoting much of its agenda to history.

By placing itself in a context that began with the early stirrings of charge cards in the 19th century, the forum was celebrating its own coming- of-age. Its meeting attracted 500 people, many of them from its 225 member organizations in the financial, telecommunications, travel, technology, media, and government sectors.

Also evident at this fourth annual gathering was a conviction among the true believers - people who have spent years trying to disprove skeptics - that their "airplane is finally about to fly," as one speaker put it.

Typically optimistic was forum president Jean McKenna. She sees momentum building over the next five years along with applications of the technology in banking and payment services, network security, remote data access, and cellular telephones.

"The smart card becomes a logical vehicle for distributed information management, identification, security, and payment," said Ms. McKenna, a Visa International vice president who was reelected to her forum post Monday night. "The impact will be revolutionary, widespread, and positive - especially for consumers."


Visa International executive vice president Peter Hill was professor for a day.

His "History of Payment Cards" covered a New York department store's introduction of charge accounts in the 1870s, the Sears installment credit program of 1905, the Western Union card of 1914, and the first hotel charge plates - pieces of embossed metal given to frequent customers - also in 1914.

Its growth stalled only by the Depression and World War II, the consumer credit business required the convenience afforded by the Diners Club, BankAmericard, and American Express plastic cards of the 1950s; the bank interchange systems of the 1960s that evolved into the MasterCard and Visa networks; and the computerized authorization systems that required armies of telephone operators until the advent of magnetic stripes on cards, automatic-dial terminals, and low-cost data capture devices in the 1970s and 1980s.

Meanwhile, MasterCard and Visa were diversifying into debit cards and automated teller machines, gold cards, corporate cards, and travelers checks - an array that lends itself to the idea of a computer chip embedded in the plastic.

In Visa's notion of a "relationship card," the microprocessor chip could be apportioned to uses as diverse as banking, health care, driver's license, frequent-traveler point system, and biometric or cryptographic security.

"We are just starting to scratch the surface of what is possible," Mr. Hill said.

Technology to ensure security across applications - so that a bank, say, cannot get access to a cardholder's health records - "needs work," he said.

But electronic commerce will require secure and reliable methods of identification and verification, such as data encryption and digital certificates, which smart cards could handle much more effectively than their magnetic-stripe ancestors.

Ms. McKenna referred to 1997 as "Year of the Internet," a likely spur to "new applications that tie the security and portability of smart cards with personal computers."


Mr. Hill added that with technical standards like those known as EMV - agreed to by the Europay, MasterCard, and Visa associations - a strong foundation has been laid for the multiplicity of services that can exploit the chip card's potential.

As for security, he noted, the MasterCard-Visa Secure Electronic Transactions protocol for Internet payments requires issuance of digital certificates to consumers. The certificates could be carried on smart cards, enabling on-line banking and shopping through any computer with a card reader.

"What will really drive the new technology," Mr. Hill said, are "multiple products on a chip, multiple services to the cardholder, and access to those services through various media," including telephones, electronic banking networks, and the Internet.

The results will be "limited only by the human imagination," Mr. Hill said. "This is not going to be regulated by the Fed or controlled by the banks but will be driven by what consumers will want."


Michel Ugon, vice president of research and technology at the Bull Group's smart card company, Bull CP8, played the role of expert lecturer. Mr. Ugon has received more than 20 patents relating to chips and card transactions, including one of the most important, the Self-Programmable One-chip Microprocessor, circa 1978.

He spoke from the vantage point of a leading smart card vendor in France - the first country to embrace and adopt the technology.

Mr. Ugon began by quoting from a French science fiction novel, "The Dawn of Time." It chronicles a civilization that relies on magic rings with stored-value functions, like smart cards.

He equated the "era of patents" - his own and others in Europe, Japan, and the United States before 1980 - with that of "the first airplanes .... Many people thought of flying only with very odd machines, but nobody was succeeding." The pressure was on to produce "something that flies."

Mr. Ugon said it took two years to develop a method for creating card chips compatible with semiconductor fabrication. He and a team worked three years to develop the first operational CP8 card, with two embedded chips, in 1979.

Mr. Ugon admitted having been too optimistic about the chip card's prospects, adding, "We can't underestimate the time it takes to implement a new system. The advice from my experience is, do it simple first .... Begin with a single function and expand afterward."


Martin Mayer, author of the 1974 book "The Bankers" and of a sequel due early next year, spoke broadly on "The History of Money," though he focused more on emerging electronic forms.

Unafraid to rile his audience, he said, "There isn't much in the stored- value card for the consumer." Merchants, though, stand to gain from the elimination of cash and automation of payments.

He also warned of the counterfeit threat: "The same fellows who created white-card credit card fraud and who duplicated payroll checks on Xerox machines will be looking for ways to load counterfeit credits onto a chip or take funds from a card without extracting value from it."

But Mr. Mayer concluded that, assuming technical standards and regulations are settled, "the gods of the marketplace are coming down on your side, and they are going to give you a big push. Then the fun will begin."


The open meeting Monday - it was followed Tuesday by a members-only session - featured several reports from the field:

*Cynthia Bengier, vice president of Wells Fargo Bank, said, "We believe the future for electronic cash is very bright." Wells' Mondex trial in San Francisco is up to 800 cardholding employees and more than 20 merchants. It has handled 25,000 transactions in 13 months.

*Edgar Brown, senior vice president of First Union National Bank, a participant in the high-profile Visa Cash trial in Atlanta, said the end of the Olympics afforded an opportunity to see "how customers will use (the card) every day."

*Lin Ison, executive manager at Commonwealth Bank of Australia, said only 2,200 cardholders are participating in the six-month-old MasterCard Cash test in Canberra, Australia's capital. But they have yielded useful data: The average purchase is $7 at a rate of eight transactions a week, and the average card load is $40.


Ben Miller, president and founder of the Cardtech/Securtech conference organization in Rockville, Md., got the forum's distinguished achievement award.

William Barr, executive director of Bellcore and vice president of the forum, said Mr. Miller, who is also a newsletter publisher, has played a major role in raising awareness about card technology.

Mr. Miller was the second honoree ever. Colin Crook, Citicorp's senior technology officer, won last year for his role in founding the forum.

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