Visa International, MasterCard International, and Europay International said they are on schedule to complete their specifications for chip- embedded smart cards by the end of this month.
"The significance of this announcement is that it gives us the platform and allows banks to start planning to do things with chips on cards," said Andrew W. Tarbox, vice president of chip card standards and specifications for MasterCard.
The joint specifications, which took less than two years to complete, address not only the cards containing computer chips, but also the terminals needed to read such cards.
Visa began collaborating with its competitors - Europay is the Belgium- based affiliate of MasterCard - in December 1993, after the organizations agreed on the need for a common technical platform.
After the specifications are formally published, the group will continue fine-tuning them as well as addressing more technologically challenging security issues.
Rank-and-file bankers, meanwhile, may be sticking their toes in the water, but they are far from taking the ultimate plunge.
"We think there is very much a place for smart cards," said William J. Moore, president and chief executive of SunTrust BankCard in Orlando. "But I think a lot of banks are just waiting."
"Smart cards are a fair ways down the road for Old Kent Bank and Trust," said Darrell G. Rickman, senior vice president and general manager of the Grand Rapids, Mich., bank's credit card division.
"We don't contemplate a move in that direction for at least three years," Mr. Rickman said. "We realize the technology is moving in that direction, but most banks are not willing to make the capital investment and take the risks associated with smart cards at this point in their evolution."
Mr. Moore and Mr. Rickman cited security concerns as well as uncertainty about whether newly manufactured terminals would be certified for use by the industry.
They are also mindful of merchant mistrust: Retailers are not eager to trash the terminals that represent the current payment systems infrastructure.
However, the multinational bank card associations "exercise fantastic clout," said Jerome Svigals, a smart card consultant based in Redwood City, Calif. "They're realistic to understand that if we're to play in tomorrow's world, we have to offer tomorrow's technology.
"Too many new products and services - like shopping over the Internet or via interactive TV - simply cannot be handled by a mag(netic) stripe card."
Mr. Svigals suggested that as the card associations amend their rules and regulations to promote use of chip cards, member financial institutions will have no choice but go along.
For their part, bankers say they want to see a proven business case. Both Visa and MasterCard say they have models for building the business case available.
"What we have is a document that shows the cost-justification over a period of years, and allows bankers to make an informed decision as to whether this will be a profitable venture for them," said a MasterCard spokeswoman.
Visa has released to its members an analytical spreadsheet that takes into account both costs and benefits.
"We think deployment of the cards can be justified based on the added functionality they offer," said Peter Hill, senior vice president of payment technologies at Visa."Customer loyalty programs, stored-value functionality, and, to a lesser degree, reduced fraud, justify smart card deployment."
Any further refinements to the business case will be handled individually by the card associations.
The three organizations said they are concentrating solely on setting technical specifications. These are to be updated and reissued annually to allow enhancements that support the dynamic evolution of chip cards. The year-to-year changes, they say, will be minor.
"The really important part (of the specification) is part one, which sets electrical and mechanical standards," said Mr. Tarbox. "These requirements are in stone, which means vendors can start making the terminals.
"The vendors have been anxiously awaiting this announcement; they are excited about creating this new infrastructure," he added.
Several major terminal manufacturers have already begun building prototypes for the new technology.
The specifications nearing completion also address some financial institution concerns, including allowing card-issuing banks influence over how transactions are processed at the point of sale.
For example, the updated specifications will include enhancements for multiapplication chip cards to work with the terminal in helping guide a cardholder through the selection of an application.
Moving forward, the three card associations will be concentrating on three additional sets of specifications and standards:
*Dynamic data authentication, a technology that will protect against counterfeiting and fraud.
*Stored value cards. "This is tricky because there are so many pilots going on internationally," said Mr. Tarbox, who added that each of the current stored value tests will be closely studied with the goal of creating a single specification for an international electronic purse.
*The interpreter concept, a highly technical issue in which instructions on the cards make it less essential to standardize the terminal infrastructure.
The three card associations say they expect each of these initiatives to be completed by June 1996.
