Three groups of bidders -- headed by CDSNet Inc., General Electric Co., and Motorola -- are competing for the rights to build an extensive smart card payment system in the Seattle area.

The network is to encompass seven mass transit agencies that operate commuter trains, light rail, buses, and ferries.

It is the second major smart card project of its kind in the United States.

Motorola, which has been highly successful around the world in joint bids with the Australian company ERG Group, won the earlier contract in May to serve 26 transit agencies in the San Francisco Bay region.

The Seattle project calls for multiple applications on the smart cards and has special requirements for integrating the cards with large employers such as Microsoft Corp. and Boeing Co., as well as institutions like the University of Washington. For example, transit cards might also provide for secure access to employees' workplaces and computer networks. University identification cards might have transportation and electronic purses for the cafeteria added on.

The request for proposals "was written in such a way as to encourage 'multi-apps' for merchants for e-purse and additional municipal applications like library cards, city swimming pools, and court fees for attorneys," said Candace Carlson, regional project manager at the King County Department of Transportation. That is the leader of the seven agencies in the project.

The 10-year contract will be awarded in March. An initial rollout of 500,000 cards is planned for the fourth quarter of 2000, with full implementation of up to a million cards by March 2001. The estimated value of the contract was not disclosed.

About 90,000 old-format transit cards would be converted to chip technology at Boeing, as would 60,000 at the University of Washington and 15,000 at Microsoft, which itself is an active promoter of a smart card operating system.

"We have had long relationships here with major universities and employers where they sell our passes," Ms. Carlson said. "These accounts will be converted to smart cards and whatever additional applications they want to put on them will be available."

Michael Dinning, division chief in charge of infrastructure protection and operations at the U.S. Department of Transportation in Cambridge, Mass., said moving from paper transit passes -- which need to be replaced each month -- to smart cards will bring significant economies.

"The smart cards could eliminate a lot of administrative work for large employers like Boeing and Microsoft," Mr. Dinning said.

Banks are largely -- but not totally -- absent among the bidding teams. Industry sources said it is still early and additional banks could join the teams, or existing ones could drop out. Citigroup and Bank of America Corp. opted out of the San Francisco transit bidding in its final stages.

The only bank directly involved in Seattle is Wells Fargo & Co., a member of the CDSNet consortium. Wells has been one of the few active U.S. banking advocates of smart cards as a 30% owner of Mondex USA, one of the franchises of MasterCard International's Mondex electronic cash system.

Another participant with CDSNet, a Los Angeles-based systems integrator, is Cybermark, a company active in the college-campus chip card market and owned by Sallie Mae of Washington, Battelle Memorial Institute of Columbus, Ohio, and two banking companies -- Huntington Bancshares of Columbus and Bank One Corp.'s First USA credit card division.

Other subcontractors are Pacific Bell, Ilium Associates Inc., a marketing firm in the Seattle suburb of Bellevue, and KDE, a Korean hardware provider that worked with CDSNet on automated fare-collection programs in Seoul and Pusan, South Korea.

Wells Fargo said it would provide automated clearing house and merchant processing services and is still deciding whether to increase its involvement by issuing cards or adding an electronic purse function.

This project gives Wells "an entry into a potential new client, the transit authority," and opens a door "to talk to them about providing other banking services," a spokesman for the company said.

"From a marketing standpoint, if this bid is selected it will put us in a very good position," the spokesman added. "It's high-profile and would fit our image of being a very sophisticated technological financial institution in Seattle, which is a high-tech area."

John Gobis, president of CDSNet, said the involvement of prominent corporations like Microsoft gives consortium members an opportunity to "develop relationships" with "interesting commercial possibilities."

Motorola, working again with ERG Group, said it is still hoping to sign on a banking partner and is in talks with three banks that have a presence in the Seattle area.

Patty Mosbrooker, director of worldwide marketing at Motorola in Schaumburg, Ill., said it has "been a pretty difficult road" to convince banks of the business case for smart cards. Bank of America was Motorola's banking partner before it bowed out in San Francisco.

"We are obviously much more intelligent now in terms of sitting down with different potential partners and working out differences," Ms. Mosbrooker said, adding that she hoped bankers' perspectives had changed since the San Francisco process.

The King County transportation agency is "very tuned in to transit as a base for other applications," Ms. Mosbrooker said. "They're going to be pretty aggressive about looking at this as more than transit."

The ERG-Motorola stable consists of GTE Corp., the Associates First Capital subsidiary SPS Payment Systems, Strata Communications, and CAE and Associates. The last two are in the wireless data communications business. General Electric Co. submitted its proposal alone.


ERG Group of Australia, a leader in the development of multipurpose smart card systems, signed an alliance agreement with Visa International to support Visa Cash and the Common Electronic Purse Specifications.

The specifications, known as CEPS, were proposed by Visa last year to create a consistent global standard for stored value cards. National and regional programs accounting for 90% of existing purse cards are backing CEPS, Visa has said.

The bank card association said that the memorandum of understanding it has signed with ERG gives the Visa Cash electronic purse as well as CEPS an important boost in the public transportation field, where ERG works in tandem with Motorola Inc. of the United States.

"Transit applications plus Visa Cash represent a powerful combination," said Gaylon Howe, Visa's senior vice president for chip products. "Our work with ERG will help to open up the mass transit market to the world's strongest electronic purse brand."

ERG chief executive officer Peter Fogarty saw the Visa deal as "another important step in the globalization of ERG's smart card strategy."

"It follows earlier alliances with Proton World and Motorola and is a clear endorsement of ERG's global smart card capabilities and strengths in the mass transit sector," Mr. Fogarty said. "We are fully supportive of CEPS initiatives and will work with Visa and our alliance partner Motorola to develop open specifications for transit smart card solutions." ?

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