Compared to the more pragmatic telecommunications and health care organizations, banks are still pretty much no-shows in the smart card market.

Bankers often cite the chicken-and-egg problem - merchants need customer demand or other incentives to tool up for integrated circuit cards, and cardholders resist until they have places and reasons to use the cards. The smart card pilot programs do not offer much in the way of progress, at least in the physical realm. The business case for replacing small cash transactions has not sunk in yet.

Further, it is hard to make the broader case that smart cards are really proven technology in "production-grade" payment environments. Real, everyday use of smart cards in banking applications is sparse, and doubts remain in some quarters about operational efficiency and security once the public starts using them en masse.

It is one thing to lose a phone card with limited value, and quite another if there is a break in a card that accesses one's demand deposit account.

In what is still a magnetic-stripe-dominated world, banks have substantial work to do to create a hybrid system and manage a transition period at a time when year-2000 and Euro currency conversions require the attention of information technology groups. What is the rush, anyway? The EMV (Eurocard-MasterCard-Visa) smart card terminal standard has been slow and expensive to roll out, and in fact only the United Kingdom has managed to introduce EMV cards.

Still, the bank card associations and card companies vigorously support smart cards - principally because of their security-enhancing and cost- saving prospects. Visa recently took the significant step of mandating that half of all its cards issued by 2005 would have chips. And industry analysts continue to point to the near elimination of fraud in France after chips were introduced on bank cards. Where is the disconnect?

Some say replacing small-value cash transactions with stored value cards benefits merchants and banks but not so much consumers. Others argue it will take multifunction or multi-application smart cards for the technology to pay off. At last year's Cardtech/Securtech conference, Hypercom Corp. presented an analysis showing that a bank could save $1.80 to $7.20 per card through cost reductions and multi-application benefits, which could make a card costing $3 to $5 begin to look attractive.

But if you had such a card, where could you use it? Is the question really, "What's in the cards?" Or is it, "How does the value in using them translate to the consumer?"

The ultimate solution may lie in the on-line world, where the smart card acts as a portable security passport. It can bring new utility, convenience, and reassurance to users uncertain of public networks but compelled to use them. In this context, getting consumers and key merchants to invest in the infrastructure seems relatively trivial. Consider three examples:

Airline reservations. A massive shift to electronic purchasing and ticketing is under way. Each of the numerous on-line services requires extensive information about the purchaser upon enrollment, including frequent flier accounts and credit card numbers. The process of consummating a good reservation deal on-line is getting more and more complicated even as the opportunities expand. A smart card that ensures proper remote identification and sorts out frequent flier numbers, seating preferences, and payment choices would seem to be readily acceptable to road warriors, small office/home office firms, and frequent leisure travelers.

Corporate travel and procurement. Imagine the corporate purchasing agents who travel constantly on behalf of their geographically dispersed companies. The ability to identify themselves, their approval levels, and their authorized transactions remotely would be exceeded in value only by on-line access to travel and entertainment details, fleet accounts for corporate vehicles, stored-value cash transactions, and loyalty points and upgrades. A single, multi-application smart card would be the key to it all.

Digital content. Many providers of digital content over the Internet - software, music, videos, etc. - experience fraud rates of 20% to 40%. Most consumers of these products and programs lead highly digital lifestyles, so asking them - or giving them incentives - to equip their computers or keyboards with smart card readers is not a big deal. Consumers could use the cards to make many stored-value or micropayment transactions that result later in a single, batched hit to their credit card line. Digital merchants would therefore seem to be highly motivated to provide their end of the infrastructure.

Situations like these could provide a powerful impetus not only to smart cards but also to the Secure Electronic Transaction standard.

These examples illustrate a common thread: "It's the application, stupid!" The issue is not the complexity of the cards, their costs, or even the politics of who is sponsoring them. The missing ingredient is banks distributing smart cards and teeing up deployments.

While bankers remain on the sidelines trying to figure all this out, they are missing out on an early, inside track to their very best customers: digital consumers, small businesses, and big corporate purchasers.

What better way is there for bankers to re-connect with these profitable customers than being the first to outfit them with secure and convenient, digital access in a way that will make them highly loyal and even dependent? What better way is there to prove an ability to innovate and plant a stake in the 21st century? Where is my "passport" smart card?

Mr. Mott is head of CSI Management Services, a software, consulting, and investment company in Stamford, Conn. Until recently, he spearheaded electronic commerce initiatives as a senior vice president of MasterCard International.

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