Three American financial services companies--Providian Financial Corp., FleetBoston Financial Corp. and the First USA credit-card subsidiary of Bank One Corp.--recently said they have inked deals with Visa USA to begin rolling out co-branded smart cards. The three are expected to place nearly 10 million smart cards into circulation next year, leading some industry optimists to hail 2001 as "the year of the smart card." But not everyone's convinced.

"The same was said about 2000, 1999 and 1998," says Paul Jamieson, senior analyst for banking and payment services at, the Lincoln, MA, consulting firm. Jamieson says that although this will be the first time large U.S. financial companies are dipping into the smart card well (not counting the Blue card from American Express), demand might not be significant enough to create a viable product. "Smart cards in the U.S. are a great solution looking for a problem, and that problem still doesn't exist," he says.

Jamieson and others believe that smart card success will depend on development of a "killer app." He says, "There is no compelling reason for merchants to retrofit their systems," noting that it would cost between $8 billion and $12 billion nationally for merchants to re-outfit their cash registers, ATM machines and other payment devices.

Others disagree. Bill Buchanan of Providian says a snowball effect will lead to widespread acceptance of the product. Providian gears its card to online shoppers, with an embedded chip that stores customer identification and account information that can be downloaded directly onto participating merchant Web sites via a reader. To hasten acceptance, Providian plans to give free card readers to its first 50,000 cardholders.

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