Anticipated growth in smart card systems globally threatens to snatch a huge portion of the banking industry's future credit card payments market, according to a study by Killen & Associates, Inc., a consulting firm based in Palo Alto, CA.

Some sources say that nonbanks like American Express and technology providers such as Motorola and Schlumberger are positioned to reap the rewards of a burgeoning global market for smart cards, while commercial banks drag their feet, unwilling to tamper with their profitable credit card programs.

Michael Killen, president of Killen & Associates, says that because banks have substantial investments in credit cards, they are going to be very slow to offer smart cards, which would eliminate fees generated by credit authorizations and credit floats. Nonbanks are more apt to bring smart card technology to market because, in many cases, they are not required to integrate it with credit card technology.

Proponents of smart cards say that Internet commerce is one reason banks should rethink their smart card strategies. The recently introduced JavaCard, for example, allows users to access the Internet without a computer and conduct financial transactions. Schlumberger, which makes the smart card, and Motorola, which manufacturers the chip on the card, expect big growth and revenue from such electronic transactions.

Despite its slow start, the United States is expected to become a major player. Schlumberger vp and general manager James Davis says industry projections show overall U.S. revenues from smart cards will nearly double from $30 million in 1996 to $58 million in 1998, jumping to $142 million by 1999. "What (banks) will lose is the opportunity for new incremental revenue, depending on how long it takes for them to adapt to the new technology," he says.


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