The smart card took another big step last week toward becoming a global standard as three credit card giants agreed on basic technical specifications for both cards and terminals.

The three multinational associations -- Visa International, MasterCard International, and MasterCard's European ally Europay International -- completed a yearlong effort to establish guidelines for the manufacture of cards with computer chips inside, and the terminals required to read them.

The first two parts of the specifications, which had been released for comment earlier this year, were revised and reissued with the third and final set of specifications. They will serve as a framework, subject to change as market testing gets under way.

Wasting no time, Visa said it had signed agreements with 20 vendors to develop and test prototype chip technology.

As of midyear, both MasterCard and Europay had formally committed to accepting chip cards throughout their networks by the end of the decade.

"Visa, MasterCard, and Europay are obviously trying to get on the fast track to smart cards, and the associations' support is all-important" said Jerome Svigals, a smart card consultant based in Redwood City, Calif. "I view this as positive and good news. Things are finally starting to happen."

The associations agree that the future of smart cards is now a question of when, not if. And the expected date for full rollout of smart cards will be sooner rather than later, they say.

Banks are getting in position to be clear winners from smart card technology, say Visa and MasterCard officials. They have come around to viewing smart cards as a vast improvement over today's magnetic stripe cards, because of the computer chip's superior information capacity, security features, and ability to accommodate value-added services with fee-income potential.

"There are limitations to the information you can get on a magnetic stripe: account number, name, and expiration date," said Richard Lonergan, a Visa senior vice president.

"But with chip cards, you could have customer loyalty programs, and a single card could attach itself to various accounts," he said. "None of these options are really possible today."

MasterCard and Visa are preparing to compete against each other with prepaid cards and other products using the new technology, but they agreed on the need for baseline technical standards to minimize their members' infrastructure costs.

While awaiting comments on their working standards from the world payment community, the three card organizations hope to have a terminal specification in place by next June.

Visa expects to parlay its experiments with vendors into a leadership role in the development of the terminal standards.

"We're not going to wait the eight months and start then," said Philip Yen, director of technology implementation for Visa. "We're taking the leadership position.

"We want to leverage the experience of these vendors," he continued.

"We will go ahead and build a prototype, see the problems, try different options. All of this will help us further define the final specifications."

To ensure member acceptance of the final product, Visa canvassed banks and merchants to give them the opportunity to define what they want from a smart card product.

In the initial phase of its terminal development program, the San Francisco-based card association will work with only three of the 20 vendors on its list: Verifone Inc., the Redwood City, Calif.-based developer of point of sale terminals, and two French vendors -- Gemplus Group, which manufactures chip cards, and Schlumberger, which makes both cards and terminals.

The partnership's second phase will also involve the other participants, including card and terminal manufacturers and automated teller machine developers.

"We chose Verifone because it is the biggest terminal vendor," said Mr. Lonergan. "Gemplus and Schlumberger are two of the biggest [smart card] vendors in France. They have the most experience because the chip card has made the most advances in France."

Encouraged by government industrial policy, French banks accepted smart card technology much more readily than their U.S. counterparts, and have already converted 22 million cards.

Despite its signed agreements with vendors and its stated commitment to develop and support smart cards, Visa has not given a timetable for the full rollout of smart cards in the United States.

MasterCard is taking a slightly different approach. It has set a target of yearend 1995 to develop global rules for acceptance and issuance of chip-based payment products. It expects to have hybrid terminals -- capable of handling both magnetic stripe and chip cards -- available to merchants by 1996. And it predicts that all MasterCard payment products will include some form of chip technology by 2000.

However, the New York-based association has decided not to enter into agreements with specific vendors. Rather, it is building a smart card data base of information from the more than 200 vendors worldwide that provide cards, terminals, ATMs, or other products and services.

"We need to work with all vendors, not just the big ones with global reach," said Robin Townend, MasterCard's senior vice president of chip card technology. "Some of our members want to purchase products and services from a local organization. Our data base will be a resource for our members, a place where they can get information about products and services."

Once terminal specifications are finalized, a certification process will be developed to ensure that manufacturers meet standards.

Eventually, said Mr. Townend, "we will keep on our data base all the vendors who have been certified. That will be extremely useful for our members ."

All three card associations in the joint specifications effort agreed there will be regular revisions.

"This is a living document; it will never be complete," said Mr. Townend. "There will be a need to revise from time to time to take advantage of advances in technology.

"My guess is, with input from members, vendors, other card organizations, and others, we'll revise the specifications annually."

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