Smart cards are moving forward so rapidly that even their boosters were expressing amazement last week at an international conference on the subject in Washington.
The conference, Cardtech/Securtech '95, graduated to the downtown Washington Hilton after four prior years at a suburban location. Yet this prime convention hotel couldn't comfortably absorb a crowd that included 1,400 seminar attendees and perhaps 4,000 more exhibit-hall visitors.
Conference chairman Ben Miller, publisher of Personal Identification News in Rockville, Md., apologized for the crowded rooms. He told the opening session that the long lead time needed for an event of this size prevented planners from accommodating a quintupling in the conference's size since 1991.
Next year, Cardtech/Securtech will move to larger quarters in Atlanta. But space is going fast: at least 170 of the 400 exhibit booths have been reserved. This year, 200 were filled and many companies were turned away.
The new venue will give attendees a first-hand look at one of the first mass rollouts of cards embedded with computer chips - a trial sponsored by Visa International, which will in part be tied in with the 1996 Olympic Games.
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Two of the most wide-eyed attendees were the two headline speakers, Edmund Jensen and Eugene Lockhart, the presidents of Visa and MasterCard.
Already well on record in support of adding chip-enhanced payment cards, they came away even more convinced they are on the right paths.
The main differences in their industry-trend speeches were about implementation - Visa has not issued a formal mandate, while MasterCard has a more explicit timetable for converting its systems for chip cards. Meanwhile, each is trying to outdo the other in the magnitude of market tests, and Visa seems to have upped the ante with its Atlanta '96 plans.
"Looking at this industry, and how this conference is growing, I think this technology will begin to feed on itself," Mr. Jensen said in an interview after his keynote speech. "It gets to a point where everybody wants in, and then you have a self-fulfilling prophecy.
"I'm beginning to believe this is going to happen faster than I had thought."
Mr. Jensen pointed out that he has come to such conclusions only about a year after first immersing himself in chip-card and other high-technology issues like electronic payments on the Internet. "If I were still a banker, I'd probably still not be talking about it," he said, alluding to his pre- 1994 career at U.S. Bancorp in Portland, Ore.
Mr. Lockhart of MasterCard chimed in that this year's 30% to 40% growth of Cardtech/Securtech and all the functions that chips in cards make possible add up to an "undeniable trend."
From the "consumer's mind's eye," he sees in chips added "control, choice, and flexibility about how to pay for things and the information created about them" - at just the time bankers need value-added products to shore up customer relationships.
Mr. Lockhart, a former banker and consultant, joined MasterCard 13 months ago and postponed action on a chip card proposal until he could understand the issues better. By the June board meeting, the business plan was proposed and adopted, and the first extensive prepaid-card pilot, in Australia, has been announced for a fourth- quarter launch.
The MasterCard chief executive agreed with Mr. Jensen that consumers have gone out in front of technology, not the other way around.
As Mr. Jensen put it in his speech, "Research tells us that customers already see their bank card as much more than a payment vehicle. They see it as the key to their bank, to virtual shopping, to all the data they might need or desire in the information age."
He added, "Customers are ready. We must catch up to their aspirations."
"Ed is right," Mr. Lockhart said later. "The customer is ahead of the technology, in the sense that they want what it will allow us to provide them: easier access, ease of use, more secure transactions, and the ability to carry fewer cards."
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Jensen & Lockhart were not the only duo in smart cards' thrall. There were also Penn & Teller.
In truth, we can't be sure about Teller, the silent half of the magician pair who provided the entertainment at the conference banquet. Penn Jillette does all the talking.
Mr. Jillette was originally booked for a one-man show. He regarded it as just another boring business gig - until he did some research about his audience.
"The more I read about smart cards, the less I got pissed off," Mr. Jillette said. "They have something to do with privacy, which I'm very concerned about; security, which I'm very concerned about; and laziness, which drives my whole life. I hate carrying things, and if I can carry just one card . . . "
So enthused, he enlisted Teller to join him in an hour-long version of their stage act.
"Before we start," Penn said, "let me give you my entire speech about smart cards: Cool!"
Later, while juggling sharp objects, he asked, "Does the biometrics still work if I lose a finger?"
He added, "When the time comes to embed chips in a human being, I'll be your first guinea pig."
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Optimism was in the air at all four previous Cardtech/Securtechs, but never in such abundance, or boldness.
Catherine Allen, vice president of Citicorp and chairman of the Smart Card Forum, which has grown to 190 members in less than two years of existence, endorsed Mr. Jensen's "key to the bank" metaphor and predicted the cards will prove to be "the ultimate in distributed computing."
"In the next two to five years, smart cards will be part of your lives," she said. "You will be using (them) for payments, information management, and secure access."
Similar messages came from other corners of the world.
J. David Livingston, senior vice president of Toronto Dominion Bank, was equally bullish - even though pilots in Canada have not yet gone beyond the planning stages. The population has taken so enthusiastically to credit and debit cards and automated teller machines, he said, that chip cards will be a logical extension, "building on what customers are familiar with."
They will get an initial boost, he said, through prepaid card programs and an interactive television project beginning in Quebec this fall, which will employ set-top boxes with chip card readers.
"I expect in 10 years to have replaced everything now in my wallet with my one TD Bank smart card," Mr. Livingston said in his conference paper. "And I expect that most other Canadians, not just card-tech types like me, will be using their chip cards just as extensively."
Representatives of Banksys and Danmont, the Belgian and Danish electronic purse systems, respectively, said they are well on the way toward mass acceptance. Indeed, those programs are seen as models for the multiservice, open, purse-like payment systems what several organizations are trying to accomplish in the United States and elsewhere.
John Ras, smart card project manager at First National Bank of South Africa, reported on a multibank effort there and concluded, "Within five years, the majority of bank and payment cards in the country should be smart . . . It is no longer a solution looking for a problem, but a technology opening doors to endless opportunity."
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One of the most geographically extensive banking smart card systems is taking off in Africa. Meridien BIAO, a bank with operations in 22 countries, has launched a 75,000-card program in Zambia and plans to take it continent-wide.
Because the MeridienCard has been operating nine months, Dan Beadle, the U.S.-based systems supplier to Meridien BIAO, claims it has beaten better known competitors like Mondex, MasterCard, and Visa into the chip card market.
"It's the first off-line plastic smart card money system, able to serve areas where telecommunications and even electricity can be a problem," said Mr. Beadle, president of Productivity Enhancement Products of Laguna Hills, Calif.
The system his company developed replaces an antiquated signature card system, provides for completely automated money flows, and can hold multiple currencies for multinational use. The cards were supplied by Micro Card Technologies Inc., part of the Bull Group's French-based CP8 Transac division.
Stelios Sardanis, a Meridien BIAO executive based in Lusaka, Zambia, noted why chip cards are especially well suited to economies and payment systems in need of modernization.
"I come from an environment where there are virtually no ATMs, no form of electronic banking, no access to a central data base, and where less than 5% of the population (in most countries) has a telephone," he said.
Aside from efficiencies, there are profits in float: "This is particularly so when interest rates can be as high as 180%," Mr. Sardanis said. "This is compounded by the fact that 40% of the cash in the economy never enters the banking system, for either cultural or religious reasons. The electronic purse will be able to capture some of that business."
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As chip technology leaps smartly forward, the standard magnetic stripe encoding technique is alive and well - and was the subject of one of the seminars within Cardtech/Securtech.
Even the most avid chip card advocates agree that the stripe, based on technology in use since the 1960s, still has a long life ahead of it.
"A hybrid stripe-IC (integrated circuit) functionality will survive," said Robin Townend, MasterCard's senior vice president for chip card technology.
In the magnetic stripe seminar, Brian James Byrne of Visa described the security and reliability problems that have spurred the movement toward chips, as well as the need to shore up the stripe for the transition period. Ashok Vaidya of Britain's Thorn EMI plugged his company's Watermark Magnetics by saying that combined with more functional technologies, the stripe can easily survive into the next century.
Watermark Magnetics was just one of many alternatives - others include Holomagnetics, Magneprint, and ValuGard - covered in a presentation by Stephen Halliday, vice president of AimUSA, the Pittsburgh-based trade group for automated data collection systems.
Mr. Halliday said the stripe has been put to more uses in recent years, including prepaid telephone cards, transit cards, airline ticketing, and drivers' licenses. "It is an inexpensive medium you can do a lot with," he said, though close attention must be paid to enhanced security measures and their cost-effectiveness.
Ronald N. Morris, a U.S. Secret Service document security expert, said data protection is the single determinant of the stripe's future. But he added that chip cards raise similar issues: A chip will still have to be reliably associated with its card and cardholder, and the printing of cards will still be susceptible to counterfeiting.
Whether the magnetic stripe is dead or alive "depends on the response of the industry and mutual sharing of responsibility by all who accept cards," Mr. Morris said. "Without this shared responsibility, the stripe is dead. With it . . . long may it live."
