For clues to where smart cards are headed in the United States, go to college. Just as the student population was the first to embrace ATMs over 20 years ago, so too it seems will universities be important indicators of the future of smart card technology. And fertile ground can be found in the unique structure of U.S. campuses which, unlike anywhere else in the world, offer a gamut of services to students, faculty, and staff.

Institutions of higher learning provide the most visible and numerous examples of the technology in all its multi-application glory, offering a variety of identification, payment, and security services.

Much of the attention has focused on Florida State University, a pioneer with 35,000 cards in circulation, and on Cybermark LLC, a company part-owned by Huntington Bancshares that recently took control of the Florida State technology.

College and university campuses are big plastic-card users to begin with - 235 schools are members of the National Association of Campus Card Users. Many have looked into an upgrade to chips, some have moved, but still their costs of up to $5 each often seem daunting compared to magnetic-stripe cards under $1.

"Smart cards will increase, although universities have a hard time cost-justifying their implementation," said Kevin Mullen, administrator of the association. "There's not a lot now that smart cards can do that mag stripes can't, and so the transition is slow. But once technical and pricing difficulties have been overcome, mag stripe will be replaced."

Colleges epitomize the self-contained communities, or "closed systems," where smart cards have long been expected to take root in advance of mass-market, open environments. Washington University in St. Louis was the first to try them in 1995, with about 15,000 students.

Capabilities have expanded from simple stored-value payment functions and physical access controls to student registrations, tuition accounting, library cards, banking and automated teller machine access, and off-campus usage. Smart cards enable Florida State students to order pizza over the Internet and download their grades.

The opportunities have attracted two main groups of technology providers: Schlumberger and its Danyl unit with strategic ally Diebold Inc.; and a consortium that includes Gemplus Group, Debitek Inc., Product Technologies Inc., V-One Corp., Verifone Inc., and Cybermark.

Cybermark was started by the Student Loan Marketing Association, which now co-owns it with Huntington and Battelle Memorial Institute. The latter two are based in Columbus, Ohio, where they made a showcase installation at Ohio Dominican College.

"One of the novel things about our system is that it can be fully integrated into a direct deposit account and funds can be downloaded from kiosks on campus," said James B. Graham, chairman and chief executive officer of Cybermark.

In its SmartCity program, Florida State "migrated from mag stripe to prepaid cards and added functionality to the cards off-line," said Bill R. Norwood, who joined eight FSU card application technology staff members in moving to Cybermark two months ago.

SunTrust Bank, Orlando, linked checking accounts to the FSU cards and made electronic financial aid disbursements possible. The electronic purse cards, recording about 400,000 transactions a month, can be used at 600 readers on campus. The stored-value function has a maximum amount of $99.99.

Magnetic stripes enable the cards to be used at off-campus ATMs and at merchant locations.

While the FSU operation will continue for at least another year, Mr. Norwood and his team will be out to sign up other universities. Mr. Graham said 12 deals are close. FSU has invested between $750,000 and $1 million, and Mr. Norwood said it costs about $200,000 per 10,000 people to implement a smart card program.

"Most colleges are now making purchasing decisions and a tremendous amount are bidding for smart card programs," said Ron Kirk, director of business development at Chattanooga, Tenn.-based Debitek, which makes card- reloading stations and vending machine components.

He said the competition is less between smart card providers than against magnetic stripe systems. But he sees chips prevailing and emerging into open systems. "The university marketplace is the beginning of smart card programs in the U.S.," Mr. Kirk said.

He naturally touts the Cybermark multi-application system as superior to Schlumberger. The latter's director of product marketing, Randy Vanderhoof, said, "Our Opus platform for campuses supports the stored-value function of ID cards for vending, laundry, POS, photocopying - and the mag stripe functions for door access, credit and debit, and personalization of campus ID cards."

Mr. Vanderhoof asserted that while Schlumberger's current customers just use the stored-value function, the chip can do much more. Schlumberger has been involved in nine college programs since 1994 and is ready to support network access, E-mail security, distance learning, health records, and electronic ticketing when demand arises.

Six of the French-owned company's systems are on Michigan campuses, led by the University of Michigan at Ann Arbor. In association with First of America Bank, Kalamazoo, 200,000 Campus First cards have been issued.

"The university issues the card, but if the cardholder chooses it can be a First of America ATM card," said Robert Golisek, manager of new product development at the bank. He said 40% took that option.

The cards are reloadable to a maximum value of $50, using cash or transferring funds from a bank account. Chip-reading devices have been installed in laundry rooms, at photocopiers, and in vending machines.

The bank plans later to use the Schlumberger loyalty program, letting cardholders earn points that can then be redeemed at selected merchants.

Middlebury College in Vermont has used Schlumberger for its Midd Card, which grew out of a card with a magnetic stripe for meal payments and a bar code for the library. The current card has a mag stripe on the back for the library, door locks, and later this summer for use as an ATM-debit card in association with National Bank of Middlebury. On the reverse side is a chip for on-campus payments and up to $50 of stored value for vending machines, microfiche readers, and laser printers. By September, 20 downtown Middlebury merchants will accept Midd Cards.

"We chose Schlumberger because it has open architecture and we can use the cards in other vendors' hardware," said Thomas Corbin, Middlebury College assistant treasurer and head of human resources.

The Midd Cards are customized to each type of user with different logos: 2,000 students, 1,000 faculty and staff, 400 retirees, 300 spouses, 1,500 summer language students, and 19,000 alumni (within 12 months.)

Total investment in the project was $250,000, compared to $20,000 for the mag stripe system, but Mr. Corbin sees ways to justify it: "We don't have to deal with coins and change and the money unused on the card is in our account. Security also loves it by being able to keep tabs on which kids are going through the door locks."

Schlumberger recently signed up the University of Pennsylvania for an installation this fall.

Building on the magnetic-stripe PennCard, the Smart PennCard will include stored value as well as links to accounts at PNC Bank and the University of Pennsylvania Student Federal Credit Union. There is also an optional link to MBNA Corp.'s affinity credit card program.

"We're sharing the costs of development and implementation with our partners, but the (card-reader) installations will be our main costs," said Laurie Cousart, director of telecommunications and leader of the Philadelphia project.

"The campus market is an ideal test bed for smart card technology," said Mr. Vanderhoof of Schlumberger. "It offers all the services of an open financial market, but in a closed, controlled, environment with eager participants." He said usage runs as high as six transactions a day per card.

Other financial institutions involved in campus card development include Commerce Bank of Kansas City, Mo., with Fort Hays State University in Kansas, and Central Fidelity National Bank of Richmond, Va., with Virginia Commonwealth University.

"We are considering setting up services on the Internet where students can get degree summaries, transcripts, and access to their grades by means of a PIN and password entered at the smart card reader beside a personal computer," said John Ross, director of Fort Hays' card center, which introduced a mag stripe program two years ago and is talking to vendors about introducing smart cards in a year.

Fort Hays introduced its University Card program two years ago although it then decided to go with magnetic stripe. The current ATM and debit functions which are optional on ID cards are used by 30% of the 4,500 students on campus.

For the moment, Fort Hays is talking to a number of vendors including Debitek and Schlumberger and is paying attention to what Microsoft is writing about smart cards at its web site. It is also interested in Hewlett-Packard's smart card reader, which can be incorporated into a PC keyboard.

"Costs and standards will drive the decision of which technology we'll go with," Mr. Ross said. "We're definitely looking at the advantages of smart cards and are trying to make a sound business decision. But we'll need a $50,000 investment to upgrade our readers in the food and beverage machines and in photocopiers."

Contrariwise, the University of Northern Colorado in Greeley looked into chips to upgrade the insecure "junk stripe" it used for stored-value on campus. It put off committing to the required investment of $200,000 to $300,000, which "just wasn't cost-effective for us," said marketing coordinator Doug Gibson. The school found a willing partner in Norwest Corp. to issue all students next fall a free checking account, with ID cards doubling as ATM cards.

Despite the occasional setback, Charles Cagliostro of Gemplus said 1997 is the year of the campus smart card. "We have received verbal commitments or purchase orders from four universities and I wouldn't be surprised if there were another five announcements by yearend," said the card manufacturer's director of strategic alliances.

"What will drive the university and corporate market to chip cards is the requirement for secure access to information," he added. "Logging on to a PC can't be done with a mag stripe and everyone wants to get down to one card. The university is where it's happening first."

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