The federal government could turn out to be the smart card's best American friend.

While bankers and others struggle with what they call "the business case," Uncle Sam is sending strong signals of endorsement that could help spur elusive private-sector acceptance.

Some federal agencies already use chip cards for door access and as cash replacements. The idea is to start small and let the technology gather its own momentum.

More than many bankers, government officials sound like true believers, even marketers.

"Smart cards are the key to more efficient service delivery," said Greg Woods, deputy director of Vice President Gore's National Partnerships for Reinventing Government program. "We're interested in developing suites of services that might be tailored to particular customer groups-students, businesses, senior citizens, federal employees."

Mr. Woods said college students who use smart cards on campuses could soon be using them for paying student loans, filing taxes, registering changes of address with the post office, renewing a driver's license, or making reservations at a national park.

Longer term, smart cards could help secure information and authenticate transactions on the Internet, store tax records and personal information, and help manage benefits programs like Social Security or Medicare.

To be sure, people in the smart card industry, bankers, and others on the periphery have heard such talk for a long time. But for the government it is becoming very real. There is a plan to issue a smart card to every federal employee.

"The government could be a significant driver of chip technology," said Diana Knox, senior vice president of chip products at Visa U.S.A., which has participated in several federal pilots. The General Services Administration's commercial card procurement program could be a big booster, as it encourages federal agencies to explore smart card applications.

David K. Hillman, a credit card consultant in the Parsippany, N.J., office of Deloitte & Touche, predicted "the government will act as an accelerant to the whole process, demanding certain enhancements in the card market. Because it is so big, it might drive the issuers and card processors to make changes in the system that might not ordinarily have come about so quickly."

"It is easy to imagine how this could progress," Mr. Woods said. "We can foresee an environment where we are giving people with smart cards much more control over their data and information."

"The acceptance and long-term vision are a reality across the government," said David Temoshok, chairman of the federal smart card task force and a staff member of the General Services Administration. "We in the government are willing to work as a catalyst" for smart cards.

The idea has bipartisan support, but the Clinton administration has used its bully pulpit to proselytize for the chip card. Mr. Gore's Access America plan of February 1997, for example, articulated an electronic commerce strategy with a role for smart cards.

The federal mandate that government benefits be delivered electronically by 2002 has also spurred interest in smart cards, though only two states- Ohio and Wyoming-are testing them.

All the approved vendors for the GSA's credit card program-American Express Co., Citicorp, First Chicago NBD Corp., Mellon Bank Corp., NationsBank Corp., and U.S. Bancorp-offer some manner of chip solution.

"I think we'll see most agencies building a smart card into their task orders, but when they exercise that option will vary," Mr. Temoshok said. "Right out of the gate, some agencies like the GSA will be deploying cards with integrated circuit chips on them, basically to do some testing and experimentation."

"Some of the agency programs have a chip component, others are postponing it," said Ms. Knox of Visa. But she says it is encouraging that three banks in the GSA bidding process-Citibank, NationsBank, and U.S. Bank-have extensive chip card experience with Visa.

Gary Glickman, president of Phoenix Planning and Evaluation Ltd. of Rockville, Md., a consulting firm that has worked on a number of government card programs, said the GSA's commercial card bid stands out as an example of how "government is taking a lead in promotion of technology to reduce administrative overhead."

Mr. Glickman said the SmartPay program, which aims to get federal workers to use smart cards every day, will have spillover effects. "Because the government is such a large buyer, a lot of what the government is doing-if they're successful-will help sponsor the infrastructure that makes the entry costs a lot cheaper for private corporations," he said.

Smart card pilots at federal agencies are relatively uncomplicated "closed systems." Some military bases are using them comprehensively, in some cases to keep track of weapons signed out from armories. Some Navy ships plan to rely on the cards as currency substitutes. In federal office buildings, smart cards are accepted at vending machines and cafeterias.

"Our mission would be to replace cash in the workplace," Mr. Temoshok said. "We can deploy readers at nominal cost within the federal working environment. We would certainly like to see that investment outside our federal workplace, whether that's local parking garages or similar facilities."

Federal officials see government and private industry engaging in a polite waltz, each trying to let the other lead at times. The government smiled on Visa's 1996 Atlanta Olympics pilot, as well as the deployment under way in New York City. Both efforts, Mr. Temoshok said, helped introduce the technology and disseminate smart card readers.

Marty Wagner, associate administrator of the GSA's office of governmentwide policy, was diplomatic about the government's card-promotion role.

"We would tend to take our cues from industry," he said. "We're a little hesitant to get into setting an example."

Mr. Wagner said the government is "actively involved in using smart cards and piloting them, but it's pretty much using commercial models to the extent practicable. We're probably ahead in some areas and behind in others."

Mr. Woods said Vice President Gore prefers commercial models and discourages "systems that are proprietary to the government. We want to do our business in the same way that industry does its business."

Mr. Woods said announcements of public-private partnerships in the chip card realm are forthcoming.

Mr. Glickman said the "resurgence of innovation" that seems to be pulsing through government offices holds great promise.

"Twenty years ago, we saw government take a lead on the automated clearing house and really be the first one in," Mr. Glickman said. "Now we see that government is just one of the users, and private volume has far surpassed government volume.

"That was a case where government saw an opportunity to save costs and provide a better service-I think we're seeing that again."

"There is an issue of who will pay the freight of issuing that card," said BancAmerica Robertson Stephens electronic commerce analyst Gary Craft. "The government is more of a general promoter of this, but I don't see how they can justify issuing a true smart card, unless it's through electronic benefits transfer."

If a smart card costs $5 to issue, he said, "You need to bring all the constituencies together to justify that." Frequent-flier miles, proprietary merchant programs, or other "value added" functions might make it worth banks' while to issue cards on the government's behalf.

"The big winner here will be the party who brands the smart card and controls the real estate on it," Mr. Craft added.

Mr. Temoshok of GSA said the government is counting on industry to set up the on-line shopping malls and privacy safeguards that will bring smart cards into the mainstream.

"We do not view that stored value as an application that is going to cause widespread deployment in the federal government," Mr. Temoshok said. "Where the chip card makes the most sense is right at the workplace-for strong and robust authentication, to gain access to the government's applications on servers, to access data and data bases in a controlled manner."

Once government workers are using smart cards in that way-as a "secure hardware token"-it is only a matter of time before electronic authentication extends to the consumer market, Mr. Temoshok said.

"Enabling public, electronic access to government services is where we will be driving with all this," Mr. Temoshok said. "The card will be a key to opening up electronic commerce."

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