In the seesaw battle between the two major bank card associations for leadership in smart card technology, Visa seems to have the upper hand - at least for the moment.

With a series of announcements last week, including plans by three member banks to issue chip cards next year in Atlanta, Visa advanced what had been mostly a technical discussion to the level of market activity.

Not to be outdone, MasterCard International said it would make a significant announcement of its own this week, perhaps seeking to win back the initiative it had gained when its board voted last summer to mandate a move toward smart cards.

At that time, Visa kept silent.

MasterCard seemed to build its momentum in September by announcing that its first smart card application would have stored value, with tests beginning this year.

When apprised of MasterCard's scheduled product announcement, Visa responded, "What product?"

Visa has now put the finishing touches on its own smart card strategy, which it characterizes as a migration to - rather than a mandate of - multiple-application cards bearing a chip.

"I think it's the most significant strategic position in (the) last 20 years," said Carl Pascarella, president and chief executive officer of Visa U.S.A. "In essence, what we're talking about is not a change in technology. We're moving from a credit environment to a relationship environment, and technology migration from the magnetic stripe to the chip is going to take us into this next level of awareness. It's going to allow us to be the key to the bank."

In a one-two punch last week, Visa introduced its first smart card application - also a stored-value card that will be marketed as a replacement for cash - and unveiled its overall strategic direction.

"We look at the chip not as a product or a service but rather as a technology," Mr. Pascarella said. "In order to have this technology migrate to a level of success we have to be sure it provides consumers with products and services that are adding value."

At a press conference last week, Visa officials said they are ready to deliver to member banks the technologies, products, devices, financial and information services, and systems needed to move to relationship-based products and services using microchip technology.

Also, Visa has begun arranging stored-value pilots in all five of its regions.

First Union Corp., NationsBank Corp., and Wachovia Corp. will participate in a stored-value card program during the 1996 Olympic Games in Atlanta.

First Union also said it would begin a citywide, open-system launching of the smart card in Atlanta in September 1995, with more than one million cards and at least 5,000 merchants.

NationsBank said it would begin issuing stored-value cards later this year in Georgia and Virginia.

Next month, the Bank of America unit of BankAmerica Corp. will begin issuing stored-value cards at Visa International headquarters in Foster City, Calif. More than 2,000 employees will be able to use the cards to make small purchases.

"I think sometimes it's a disservice to everybody to talk about technology without talking about the consumer need we're trying to fill," said Scott P. Marks, executive vice president of First Chicago Corp., who is a director on Visa's international board. "The stored-value card concept is responding to a real and important need to let the consumer do low- dollar transactions conveniently and efficiently."

Once consumers embrace stored-value cards, Visa believes demand for broader relationship-based products will skyrocket. "Everything we do is to leverage the thing we think is the most valuable commodity," Mr. Pascarella explained, "and that is the bank's relationship to the consumer."

Visa describes a relationship-based card as "an enhancement of existing card services and/or the addition of new services that a member delivers to a customer via a chip-based card or other device."

Consumers will want access to multiple accounts - credit, debit, investments, and stored-value, Visa predicts. And they will want to get cash, pay bills, and inquire about account balances using personal computers, automated teller machines, screen phones, personal digital assistants, and/or interactive television.

Banks will define and build these relationship accounts with the customer, Mr. Pascarella said, so the relationship card will vary by institution. "We feel banks should be focusing their dollars on differentiating in the marketplace, as opposed to spending money on the infrastructure, which is dynamic. We're looking at providing that infrastructure, and chip technology is the enabler or the means toward the end."

This year, Visa said, it will evaluate security, create prototype cards and terminals, and do lab and field tests. Next year, it will conduct the stored-value pilots and national market pilots, with international market pilots set for 1997.

Meanwhile, Visa has developed an "easy entry program" for members, to let banks make the transition from magnetic stripe to chip cards.

MasterCard and Visa are working toward the same goal - use of chips - but they differ on the means.

"We don't think mandating use of chip is the way to go," Mr. Pascarella said.

"One of the keys to planning for the future and for having a migration strategy is to maintain flexibility," said Benjamin Miller, conference chairman of CardTech/SecurTech, Rockville, Md. "In America a lot of times that includes not necessarily tying yourself firmly into a particular strategy but setting a direction and a mold in which tactical decisions can be made."

While MasterCard has said "virtually all" of its products and card- accepting locations will be equipped to handle smart cards by the year 2000, it, too, must follow what the market requires, said Mr. Marks of First Chicago.

"The associations are always looking for ways to differentiate themselves from the other guy," he pointed out. "But at the end of the day, they both have to come back to the reality of the marketplace and (ask themselves,) 'Do we have a strong, rational business case for this major new initiative?'."

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