Gemplus Group has signed an agreement with Welcome Real-Time, a vendor of loyalty software for smart cards, to jointly market "frequent customer" cards to financial institutions.

The companies, both based in France, plan to solicit credit card issuers in the United States to buy chip cards that accrue loyalty points at multiple participating merchants.

They agree that combining payment services with loyalty "is the winning strategy" for smart cards, said Sami Baghdadi, vice president of electronic business at Gemplus, a top smart card manufacturer that emphasizes its ability to develop or integrate software. "This is the key to the mass deployment of smart cards."

Terms of the marketing relationship were not disclosed, but Welcome Real-Time said it is not exclusive.

Welcome Real-Time's software enables a smart card to store and process the electronic equivalent of the paper punch cards that small retailers- such as coffee shops-use to encourage repeat patronage. The company calls its product XLS, for extended loyalty system.

The companies say they hope to create an acceptance brand for the loyalty program, with a logo equivalent to the credit card decals on retail merchants' doors.

Welcome Real-Time's loyalty software is already running on about one million Gemplus smart cards, mostly in France.

The next step is to find banks that want to issue chip-based credit cards with a loyalty component, said Aneace Haddad, president and chief executive officer of Welcome Real-Time, which is based in the southern French city of Aix-en-Provence, not far from Gemplus' headquarters in Gemenos.

Mr. Haddad estimated that 100 million smart payment cards will be branded with Welcome Real-Time' loyalty program by 2002 and that 50% to 75% of his company's revenue will come from the United States next year.

"The goal for banks or any kind of credit card issuer is to get their cards used more often and to reduce attrition," Mr. Haddad said in a telephone interview.

Because the embedded chip enables transactions to be processed off-line, a smart credit card can appeal to segments of the market that typically do not accept such cards, such as fast food restaurants, Mr. Haddad said.

Both Gemplus and Welcome Real-Time are counting on loyalty applications to drive smart card acceptance in the United States.

Marc Lassus, Gemplus' co-founder and chairman of Gemplus International, has said that "loyalty cards and couponing will open the American market to smart cards and become the largest application there."

At Cartes '98, last October's edition of the smart card industry's annual trade show in Paris, Gemplus introduced GemClub-Memo, a loyalty and electronic purse system geared for retailers. Mr. Haddad said Welcome Real- Time's software can work with GemClub-Memo.

Gemplus and Welcome Real-Time say they are undaunted by the resistance that smart cards have met in the United States.

From a banking perspective, "there is really no 'killer app' other than customer incentives and moving the customer to use one card in his wallet over another one," Mr. Haddad said.

"Like any new technology in the United States, once the business case is understood by everybody," the smart card market will "explode from one day to the next," Mr. Haddad said.

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