In June 1997, when he started Audesi Technologies Inc. in Canada, Brian McKinney sounded like a contrarian.

When many people in the smart card industry-particularly bankers involved in tests of the technology-were fixated on stored value or electronic purse functions, Mr. McKinney had already gotten the multi- application religion.

Mr. McKinney, 36, Audesi's president, had decided-and had built his company around the notion-that cards with computer chips inside would succeed only if they could perform many functions through a variety of devices and appliances likely to be connected by the Internet.

"When we started Audesi, smart cards in the Canadian market were being driven by electronic cash," said Mr. McKinney, a former Northern Telecom executive who had been close to major banks' experimentation with the MasterCard-controlled Mondex system. "We didn't think e-cash would be the driver, so we engineered everything to target multi-applications."

Among those applications are the loyalty-point systems many industry observers view as a winning complement to banking and payment services.

Audesi-pronounced "Odyssey"-derives its name from the chemical symbols for gold (Au) and silicon (Si). The company is small, with just 25 employees, but it thinks big about extending smart card uses to homes, businesses, and portable devices equipped with appropriate readers and communications links.

Judging from the business and attention it is attracting, the Calgary company could come to wield significant influence in the next round of chip card evolution. But as is true of many such entrepreneurial ventures, the market has to catch up to the vision.

Audesi's technology can transform single-use devices like telephones or point of sale terminals into multifunction devices, said Henry N. Dreifus, a noted consultant on smart cards and data security. His recent addition to Audesi's board of directors is itself a credibility enhancer.

"This has tremendous implications for the smart card industry," said Mr. Dreifus, head of Dreifus Associates Ltd. of Orlando. He said Audesi's technology can perform immediately "what before would have taken an army of programmers a year to develop, just to support that one application in smart cards."

In one recent project, Audesi worked with Aastra Telecom Inc. of Toronto to develop a smart card-reading automated teller machine for the home. The Aastra product, with technology licensed from Audesi, is being tested in the current Mondex trial in Sherbrooke, Quebec.

Audesi is working on several other efforts to integrate smart card technology with Internet appliances, Mr. McKinney said. He would not say who the clients are.

Mr. McKinney spent 12 years with the Nortel Networks unit of Northern Telecom in Calgary. His last post there was as director of product development and technology in the consumer product group.

His work at Nortel on innovative, Java-language programming and on a screen-based telephone that was tested in the first Mondex trial in Guelph, Ontario, led him to start Audesi.

Terry Sydoryk, Audesi's vice president of product marketing, said Mr. McKinney "felt that there was an opportunity to take these types of products to market through an entrepreneurial company."

Mr. McKinney and Mr. Sydoryk, teaming up with chief operating officer Greg Kletke and vice president of technology Stephen Maryka, have secured $2.11 million of venture capital and hired more than 25 developers, many from Nortel.

The company chose to work in Sun Microsystems Inc.'s Java framework because all employees had worked in it and "saw the values from a development perspective," said Mr. Sydoryk, who previously directed the smart card products group at Nortel.

"We believe in Java technology as a means of taking a product quickly to the market," he said.

But smart cards in North America have been moving at considerably less than the Internet speed for which Java seems so well suited. Audesi has necessarily focused on the longer term. Mr. Sydoryk said this "has allowed us to look at other opportunities," particularly where smart cards and the Internet intersect.

"Within the U.S. market, we're strongly of the opinion that Internet security will drive smart cards," Mr. McKinney said. "Military and campus applications will dominate for the next 18 to 24 months" until more smart cards are launched that combine a variety of applications.

Audesi's emphasis now is on helping financial institutions increase their penetration on the Internet. Audesi estimates that 12% of banking transactions are done by computer from remote locations but that this could rise to 30% if banks increased the appeal of their Internet sites.

Mr. McKinney said home-based devices that can read smart cards could foster this migration. Security features built into the chips could help allay consumers' security fears about the Internet, he added.

By Audesi's estimate, telephone transactions that cost 40 to 50 cents each to process could be displaced by two-cent Internet transactions.

Mr. Dreifus said the flexibility of Audesi's systems, which can sit inside small appliances and be configured in various ways, "changes how you'll develop products in the future, how you'll deploy them and support them."

Mondex-which runs on a specialized operating system called Multos-and Java are "like oil and vinegar," Mr. Dreifus said. Yet Audesi's Java platform can support Mondex applications.

Audesi officials concede that they will be waiting a while for wide acceptance of their technology. Their customers are distracted by year-2000 concerns and mergers in the financial industry.

And there is much rethinking about smart cards in the wake of stored- value program disappointments such as the one that recently ended in New York City.

Mr. Sydoryk predicted that financial institutions would "see the smart card as a differentiation that they can take to their customer base"-but no sooner than the second half of 2000.

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