Just as Charlie Brown believed that Lucy would hold the football in place for him to kick it - this time for sure - only to see her snatch it away at the last minute, smart card advocates have predicted the success of chip cards in the United States, only to have their hopes dashed.
Could the time for chip cards have finally arrived - for sure?
It is shaping up as a dramatic month for chip cards. For the first time, the country's major credit card banks are making firm commitments to deploying the technology - not just in scattershot pilots, but in a mass-market way. Visa U.S.A. plans to debut a national advertising campaign for smart cards next week, and to run it heavily during the Visa-sponsored Olympic games.
"What you're seeing is major rollouts," said Diana Knox, senior vice president in smart card applications and market development at Visa U.S.A. "We believe that a year from now we'll have millions of smart cards in the market in the U.S."
On Monday, Visa International announced it had joined with Gemplus and Sun Microsystems Inc. to offer a low-priced multi-application smart card - $3 each when ordered in bulk - and American Banker reported that nine of the largest credit card banks planned to issue it.
Then Providian Financial Corp. - apparently trying to claim some sort of smart card "first" - quickly followed with an announcement that it was introducing smart cards and would start mailing offers to platinum-type customer prospects this month.
On Tuesday, Visa U.S.A. issued a formal announcement that three banks - the First USA credit card division of Bank One Corp., FleetBoston Financial Corp., and Providian - had signed on to issue "smart Visa."
"What we're announcing today couldn't have happened four years ago," Ms. Knox said Tuesday. In 1996, the cost of the cards, readers, and accompanying software were too high for banks to justify them, and the Internet had not caught on the way it has today. People still believed that electronic purse applications were going to be the ones that piqued consumer interest, but various pilot tests - including one at the 1996 Atlanta Olympics - seemed to prove them wrong.
Today, smart cards are being looked to for their ability to authenticate consumers on the Internet and to authorize online payments in a secure way. With high fraud rates for online transactions and the attendant publicity, "customers are demanding the added security that you can only get through a smart card at this point," said Bill Buchanan, senior vice president at Providian.
To the first 50,000 people who sign up for its chip product, Providian will give a free smart card reader that attaches to a personal computer and comes loaded with software that can prompt them through a setup routine. Subsequent customers will pay $19.95.
American Express Co. already offers these features with its Blue card, the first hybrid chip/magnetic stripe card to hit the U.S. market. The popularity of Blue showed many doubters that smart cards were commercially viable here, experts say.
The cards that Visa is promoting have 32K of memory and can do a lot of things. The cards have credit and debit capabilities built into the chips, which will come in handy should the day ever come that U.S. merchants are equipped with point of sale terminals that can accept smart cards. These terminals will have to adhere to the EMV (Europay, MasterCard, Visa) standard, which was adopted in 1996 and has been deployed largely in the United Kingdom and parts of Asia and South America.
In addition to debit and credit, the smart Visa cards can accommodate all types of loyalty programs and a variety of whiz-bang Internet applications. They can be set up to hold digital wallets, and to fill in - or "prepopulate," in industry lingo - online order forms from Internet merchants. They can be programmed to invoke different levels of Internet security, meaning that someone who wanted to do a low-dollar Internet purchase could do so by supplying a password, but someone who wanted to make a sensitive or high-dollar transaction would have to use an encrypted digital signature, which could be stored on the chip.
President Clinton's signing this year of legislation that gave digital signatures the legal weight of their real-world equivalents was a boon for the smart card industry. "That act alone is going to do a lot to promote the use of smart card technology for authorization and authentication," said Catherine A. Allen, chief executive officer of BITS, the technology arm of the Financial Services Roundtable.
Among this week's flurry of announcements was one from Visa U.S.A. about a "smart Visa" technology platform, which is essentially a do-it-yourself smart card kit for any member bank that wants to design its own program. Ms. Knox said banks will be able to issue smart Visa debit cards and smart Visa corporate cards, plus cobranded smart Visa cards of every stripe.
Visa has put out an optional design format for banks - the word "smart" placed right near the gold microprocessor chip, along with a spectrum bar of colors - and at least one bank, Providian, has adopted it. The ability to customize both card design and the applications hosted on the chip is "the beauty of the technology," Ms. Knox said. "We haven't had the ability with magnetic stripe technology for members to really distinguish themselves, but with chip, there's just so much opportunity for differentiation and customization."
Providian is trying to use the debut of its smart card program to make various statements. The design bears the Providian name in bold capital letters on the front of the card, and signals the company's new emphasis on promoting its own brand. "This is the launch of the first Providian-branded credit card," said Alan Elias, a company spokesman. "Most Providian cards, you'll find the name on the back."
In a second corporate policy change, the Providian Visa with smart technology will come with a "a whole new level of clear customer disclosure," Mr. Elias said. The company - which got in hot water last year for failing to be up-front about the fees it was charging - has redone its terms-and-conditions sheets in larger type and simpler language.
Interestingly, the rush to bring chip cards to market comes during a break in the Justice Department's antitrust trial against the card associations. Among the government's allegations are that Visa and MasterCard acted in concert to stifle innovations, including smart cards. Some witnesses have testified that, several years ago, MasterCard was ready to bring chip to market, but did not do so because Visa was unprepared.
Even though MasterCard seemed to put itself in a good position when it bought a majority share of the Mondex smart card system in 1997, Visa seems to be leading the horse race in the United States.
In a statement responding to Tuesday's Visa announcement, MasterCard said, "at this time, we are in the midst of presenting smart card opportunities to our U.S. member financial institutions, and in advanced discussions with certain members." MasterCard said there will be 27.7 million MasterCard-branded smart cards worldwide by yearend.
Visa says its banks have issued 23 million smart cards worldwide, most of them in France. Visa also says that more U.S. banks are poised to announce smart card programs through Visa.
Donna K. Farmer, president and chief executive officer of the Smart Card Forum, a consortium with more than 200 bank and nonbank members, said the latest developments mark "an extraordinarily exciting advancement for the smart card industry."
"My own opinion is that the North American market is going to be moved by privacy and security," Ms. Farmer said.
It may be too early to declare victory for smart cards in the United States - merchant terminals will not be ubiquitous for a long time, and it remains to be seen whether consumers really want the Internet security they say they do. For a few years at least, only the early-adopters are going to go to the trouble of hooking card-readers up to their serial ports. But in the long run, things are looking up for the long-suffering chip card crowd.
"You're going to see a wide range of applications on these cards," said Ms. Knox of Visa.