The United Kingdom may be the next country, after France, to put computer chips on all bank cards.

Britain's Association for Payment Clearing Services will develop a smart card program for credit, debit, and automated teller machine cards, to be made available to member banks.

The bank association is designing the system with international associations Visa, MasterCard, and Europay, as well as card makers Schlumberger, Gemplus, and Delphic. Testing will begin this year, with a possible rollout scheduled for late 1997.

"The main objective of the project is to secure the cards," said Richard Tyson Davies, an association spokesman. Britain, with 86 million plastic cards in circulation, experienced fraud losses of 165 million pounds in 1991 and 1992.

Though that figure has since decreased by 50%, and only 12% of Britain's card loan losses are attributed to counterfeiting, Mr. Davies said British bankers "have a great fear that counterfeit will come in and bite us." Through the heightened security offered by chip technology, banks can "shut the stable door before the horse has bolted." Mr. Davies added, "The whole industry is working to bring chip cards into the debit and credit arena."

The new smart bank cards will meet the global standards and specifications set by Europay, MasterCard, and Visa.

"It's another step in the migration of the global payment system to the universal use of chip cards," said Michael H. Smith, U.S.-based general manager of Schlumberger, a French company. France completed its conversion of 22 million payment cards in 1993.

To accomplish the task in Britain, point of sale terminals in retail locations will have to be upgraded with smart card readers and personal identification number pads. Mr. Davies said the British association is negotiating with merchants to facilitate the costly conversion.

Though the association's chip is intended to provide security, banks may enhance the program to include loyalty, stored value, and other applications.

Mondex, a joint venture of association members National Westminster Bank and Midland Bank, is testing its own stored value smart card in Swindon, England. Mondex's chief executive, Tim Jones, said the two projects are noncompetitive and called them part of the same institution.

The electronic purse application for small purchases, also set to rollout in 1997, could coexist with smart bank cards as long as merchant terminals accept both, he said. Those discussions are ongoing.

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