Visa International announced two smart card pilots Thursday, one in the physical world and one in the virtual world.

First Union Corp. of Charlotte, N.C., said it has started a Visa Cash program with the Army. BankAmerica Corp. of San Francisco will test the same type of stored-value system on the Internet with employees and cyber- merchants.

For the yearlong Army test, which began Thursday, 28,000 recruits at the Fort Leonard Wood training base in Missouri will get cards like those offered in Atlanta during the 1996 summer Olympic Games.

The Treasury-funded pilot is designed to "streamline some purchasing transactions within military bases," said department spokesman James Hagedorn. "It's an application that could be expanded to other parts of government."

Also, he said, the test is expected to answer a broad set of questions about electronic cash: "Will it save taxpayers' money? Is it efficient, quick as cash, and easily understood? Is the infrastructure sound?"

The Treasury Department generates more than 850 million payments a year and is under a mandate to convert most to electronic form by Jan. 1, 1999. Mr. Hagedorn said the agency was impressed by Visa's Olympic trial and is "always looking for new and inventive ways to pay people."

Cards worth $200 are being issued to recruits as a replacement for the traditional cash advance received upon arrival.

Recruits will use Visa Cash "to get their first Army haircut," as well as for other goods and services at the post, said Michael Love, First Union's vice president of smart card technology.

Subsequent payments will be directly deposited into newly established military payroll accounts. The cards can be used for the full eight-week basic training period, at which point remaining balances will be credited to trainees' accounts.

For security, the disposable cards will have a signature panel, and identification will be required for purchases.

First Union, as prime contractor, supplied the system with card maker Schlumberger and terminal maker Verifone Inc. The test will cost the government $500,000 for equipment and cards and services.

Mr. Love said a percentage of each transaction will be paid to the bank as a merchant discount fee.

"I anticipate that (Treasury) would move (the system) beyond one military post to many," said Dan Cunningham, a consultant with Phoenix Planning & Evaluation Ltd. of Rockville, Md.

He pointed out that smart cards have been tested by the Marines at Parris Island, S.C., and the Marc Card, a military smart card program, has won awards for its multi-application operating system. Bank of America will start a six-month test on the Internet this summer with several hundred employees of both the bank and Visa.

Broderbund Software Inc., CardMart Greetings, and Newsletter Technologies Inc. will be the first merchant participants, with others expected to follow.

"Low-cost, cash-like transactions on the Internet must be as simple and easy for consumers as cash and coins in the physical world," said Gaylon Howe, senior vice president of chip card products for Visa International.

Jeanine Brown, executive vice president of Bank of America's interactive banking division, said the pilot "fits in well with our electronic commerce strategy, which is to explore and test multiple applications operating on different chip-card systems."

The companies said a demonstration of the technology is scheduled for the Cardtech/Securtech conference in Orlando next week.

In a similar effort announced last month, AT&T Universal Card Services will test Mondex, the MasterCard-owned electronic cash brand, over the Internet. AT&T has not announced its on-line merchant participants, but said 400 employees will participate.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.