As if humbled by its resounding success as a sounding board for new technology, the Smart Card Forum is staying back with the basics.

Its third annual conference last week in suburban Washington bore the lofty theme of "Smart Cards and Electronic Commerce: Gateway to the National Information Infrastructure," but much of the content resembled a school curriculum.

One afternoon program, geared for the many newcomers in the crowd of 500, was titled "Smart Card 101." Another was a how-to session on selling a business case to conservative or recalcitrant senior executives and overcoming internal political resistance.

Catherine A. Allen, a Citicorp vice president and founding chairman of the Smart Card Forum, proclaimed an "education/clearing house" role as one of the group's three principal goals. The others are more technical: to promote interoperability through standards, and to facilitate market trials.

Ms. Allen said the forum expects to establish an educational institute in 1996 and is working on a book "to educate decision makers about the technology" and related issues.

The message was clear: The Smart Card Forum wants desperately to bring the world up to speed. It admits that despite the fashionable glow on payment cards with computer chips inside, there is still a long row to hoe.


The educational focus may be a necessary byproduct of the forum's own progress. Since its first open meeting - held, like last week's, at the Ritz-Carlton Hotel in Tysons Corner, Va. - corporate membership has risen from about 50 to 130 a year ago to more than 220. Conference attendance has gone from 150 to around 350 to more than 500 this year.

Smart cards are hot. The Smart Card Forum has done significant missionary work, bringing into dialogue participants from many businesses - including such rival intraindustry pairings as MasterCard and Visa, AT&T and MCI, Microsoft and IBM, Andersen Consulting and Booz, Allen & Hamilton.

But despite the buzz and the growing list of market trials, including several by MasterCard and Visa and the Mondex electronic cash card in England and at Wells Fargo Bank in San Francisco, Ms. Allen and other forum leaders say full acknowledgement and acceptance still exceed their grasp.

"A lot is going on in the United States," Ms. Allen said, "but there is still not a lot of awareness."

Meanwhile, retailers are still hard to locate at forum meetings or on the membership roster - a failing the forum hopes to rectify by forming a retail working group. It will operate alongside groups covering financial services, government services, telephony, health care, education, and transportation.

A travel and entertainment group is also being organized.


The influx of new people - an electronic poll at the forum conference revealed that 38% had been involved with smart cards for less than a year, and another 38% for only one to two years - underscored the need for basic education.

The Smart Card 101 session, with presentations from key executives of MCI Telecommunications, Verifone, and card manufacturers Gemplus and Giesecke & Devrient, attracted an overflow crowd.

A majority of the approximately 300 who answered the interactive questionnaire last Monday predicted it will take five years for 25% of U.S. households to have smart cards. When asked about the barriers within their organizations, 29% identified an unclear business case, 13% a lack of interoperability standards, 13% a lack of buy-in from senior management, and 12% a lack of consumer or merchant acceptance.

"Making the business case" was on the minds of many. Among others, Ms. Allen brought in Martha Rea of Payment Systems Inc. to discuss business and economic forces, and "learning consultant" Ron Schultz of Creative Services on how to make "the internal sale."

A simple justification was offered at a press briefing by MasterCard vice president Andy Tarbox. Pointing to consumer research indicating that many people would change banks to get an electronic purse card, he said, "Next to the $100 it typically costs a bank to acquire a new account relationship, what is the $2 or $4 it costs for a chip card?"


If there is a top banking executive who truly "gets it," in the estimation of the smart card crowd, he is Colin Crook, Citicorp's chief technology officer. Last week he received the forum's first distinguished achievement award.

It was Mr. Crook who lent Citicorp's prestige and offices and the organizational and communicative skills of Catherine Allen, his vice president for business development and alliances, to get the Smart Card Forum off the ground in 1993.

In his speech after accepting the award, Mr. Crook spoke broadly about management and what he views as deficient corporate attitudes toward technology. He referred only briefly to the "severe case of hubris" that Citicorp overcame in the interest of the collective action that would be required for smart cards to reach their potential.

Ms. Allen said the huge response to the forum "had more to do with trends" than with the individuals involved. "This is how business will be done - working as a group across industries," Ms. Allen said. "It's how our customers want us to behave and how we will have to do business to be successful in the future."


Mr. Crook, as intent as Ms. Allen not to gloat about the Smart Card Forum's achievements to date, spoke at length about the new thinking required by this age of "discontinuities" and "nonlinear market mechanisms."

By adhering to a static worldview and to organizational models built for past eras when changes came slowly and perceptibly, he said, traditional managements fail to grasp the revolutionary implications of technology. For example: the rapidity of product development cycles, which create what Mr. Crook called "short learning loops" and the need for "extreme agility" in assessing the competition and responding.

"In the financial and banking industry, I am appalled at how so many are illiterate about technology," Mr. Crook said. "It is reshaping not only our companies, but entire markets, and economic behavior is being redefined."

The new age calls for "complex and adaptive" organizational behaviors and "puts a premium on companies' being curious about their external world ... with less emphasis on transacting and administrating their businesses," said Mr. Crook. He said his views have been influenced by Brian Arthur, an economist who holds a Citicorp-endowed professorship at the Santa Fe Institute.

Mr. Crook noted that thanks to MTV, a teenage fad can spread worldwide within 48 hours. But he wondered aloud how many tradition-bound, middle- aged or older business managers have ever given MTV a thought.


Mr. Crook tempered his optimism about chip cards with some cautionary observations on the Smart Card Forum's challenges.

He sees the enhanced card as an "empowering mechanism" for the consumer and as an authentication tool for assuring the user's identity through computer systems.

"Classical customer service goes away," Mr. Crook said. "Customers will do it themselves by coming directly into your system. The smart card gives them the ability to identify themselves and enables them to interact."

But the Citicorp executive asked, "Is there an enabling, alliance-based infrastructure in place?" Without it, he said, smart cards "will take a long time to happen."

He aimed a slight jab at Mondex and its lack of an "underlying enabling infrastructure" to take it beyond the experimental stage. The presence of one such infrastructure, the Internet's World Wide Web, made Netscape Communications Corp. and its recent stock offering an overnight success. The lack of such a mechanism "is one of the biggest problems we have in the smart card world."


Hip to Mr. Crook's critique, H. Eugene Lockhart, president of MasterCard International Inc., titled his Smart Card Forum keynote speech "Navigating in an Age of Convergence."

On the educational theme, Mr. Lockhart said MasterCard, which is nearing the start of its Australian smart card pilot and is a key member of the Smartcash joint venture in the U.S., has distributed to more than 1,000 members copies of its computer program, "Getting Smart About Smart Cards."

Mr. Lockhart also offered a tantalizing glimpse at a report MasterCard plans to release later this year on consumer banking habits - a follow-up to the Bank Administration Institute's 1993 study on retail delivery delivery systems. That study was prepared by First Manhattan Consulting Group, where Mr. Lockhart worked at the time.

Preliminary results of the MasterCard study, which Mr. Lockhart said was carried out by the same research team, showed an even more pronounced shift away from branch usage. Seven out of 10 transactions, they indicated, are now performed at automated teller machines, via telephone, debit cards, direct deposit, or other remote means, up from 57% in 1993.

"Even if we are half wrong, we are talking about another 7% to 8% migration of transactions outside of branches," Mr. Lockhart said. "This reflects a major change in the consumer's appetite and behavior that you have to plan for."


The Smart Card Forum elected a new chairman, Jean T. McKenna of Visa International. Ms. Allen, who had come to personify the group, had reached the two-year limit set in the bylaws. She will remain a board member.

Unlike Ms. Allen, who came relatively recently into the chip card field from a marketing background, Ms. McKenna has been working with the technology for many years. One of her current assignments as vice president of technology development is to represent Visa on the chip-specifications working group with MasterCard and Europay International.

Ms. McKenna is succeeded as vice chairman by William J. Barr, executive director of information networking initiatives at Bellcore, the research arm of the regional Bell operating companies. Mr. Barr and Bellcore were charter participants in the forum, joining Ms. Allen early in her organizational work.

Michael H. Smith, U.S.-based general manager of Schlumberger smart cards and systems, and Gerald Hubbard, vice president of marketing of the Bull Group's Micro Card Technologies unit, are the forum's secretary and treasurer.

Joining the four top officers on the executive committee are Ronald Braco, senior vice president of Chemical Bank, and Robert J. Wesley, vice president of international business development, American Express Travel Related Services Co.

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