The U.S. subsidiary of a German electronics company has committed to smart cards for corporate travel and entertainment.

Last September, 2,500 executives of Siemens USA received U.S. Bank Visa cards that had both chips and magnetic stripes. For this test, the chips can be read at only 11 locations-some National Car Rental outlets and Sheraton Hotels-but Siemens says the system shows promise as a money-saver.

U.S. Bank executives say interest in smart cards is growing among corporate card customers, and Siemens is providing a showcase.

National and Sheraton "see this as one of the first smart card applications they've been approached with that really makes sense for them," said Ralph Bernstein, vice president for emerging products and markets at U.S. Bank of Minneapolis, the flagship of U.S. Bancorp. "The conclusion we've drawn is that we've hit on something pretty high-value."

Before going to smart cards, New York-based Siemens USA had studied its T&E costs and concluded it was overspending by $1 million a year. Half of all corporate travel arrangements were booked without regard to he discount rates that Siemens had negotiated with preferred suppliers.

Sometimes employees were neglecting to give their Siemens identification numbers when making reservations; sometimes the travel agents were remiss.

In August 1996, Siemens executives described the situation to their longtime corporate card issuer and asked how human error could be reduced.

"They said to us, 'Gosh, since the card seems to be the common denominator in these transactions, isn't there a way we can make the card take care of this problem?'" Mr. Bernstein of U.S. Bank recalled. The challenge was to "get these ID numbers into the hands of these travel suppliers before the company got billed."

Hanna Murphy, director of corporate travel and fleet services for Siemens' operations in the Americas, said the bank "immediately bought into" the smart card idea. "I believe they really saw a good application and a good case behind it."

Though Siemens is itself in the chip production and smart card business- its own chips go into the U.S. Bank cards-the T&E program was more about solving a business problem than plugging smart cards.

It took two years to get the pilot up and running, the executives said, because of the complexities of signing up the travel vendors and equipping them with terminals.

U.S. Bank worked with 3-G International Inc. of Springfield, Va., a smart card systems company that developed the application necessary to capture and correct the negotiated travel rates.

"It's a very costly process for the suppliers to get their mainframes adapted to smart card technology," Ms. Murphy said. With year-2000 conversion issues looming, it is "a bad time" to try to interest companies in smart cards, she said.

National Car Rental, at offices in Atlanta, Minneapolis, San Francisco, and Newark, N.J., installed computer keyboards that can read smart cards and magnetic stripe cards.

Sheraton put credit card terminals that can also read smart cards into hotels in New York, Los Angeles, and Chicago.

Both companies are working with U.S. Bank to add locations but plan to proceed slowly until demand grows, Mr. Bernstein said. "I don't think we can use a light-switch approach and say, 'Now that it works, we're going to enable the world with smart cards,'" he said.

Ms. Murphy, who is based in Santa Clara, Calif., said Siemens is eager to bring more travel vendors on board and give smart cards to more of its 30,000 corporate travel card holders.

The chips on Siemens' corporate cards hold credit information and the identification numbers needed to obtain the proper discount rate.

Ms. Murphy said she tested the program by calling to reserve a National car without identifying herself as a Siemens employee. When she presented her smart card for payment, the terminal recognized her credential and billed her at the preferred rate.

"We want to burden the traveler as little as possible," Ms. Murphy said. "Most companies are struggling with the fact that the employees don't use the corporate card-they want to use their own card with the frequent-flier miles on it."

Ms. Murphy said employees who have smart cards find them handy and feel motivated to use them. "We know that we are on the right track, because this is what the traveler wants-one card to buy travel services," she said. "The concept is very well accepted, and now we just need to get the suppliers on board."

Diana Knox, senior vice president of chip products for Visa U.S.A., called the Siemens program "a classic example of how multi-application smart cards can be used to solve real business problems."

The pilot "illustrates the important role that bank-issued smart cards are beginning to play in many industries," she said.

Ms. Murphy said that as other companies start using smart cards, vendors will have more reasons to accept the technology. The systems installed at Sheraton and National Car Rental were designed with network expansion in mind. "We made the platform as broad as we could, so our suppliers are not confined to a Visa card only," Ms. Murphy said.

Mr. Bernstein said U.S. Bank will soon be analyzing the preliminary results of the Siemens project to ascertain how much money was saved.

"Our goal would be to look at doing more smart card applications where they make sense," he said. "We're not really interested in just throwing chips on cards for the sake of it, but we have lots of ideas" for the technology.

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