May 17, 1997 in Nation/World

New Standards Set In Bid To Boost ‘Smart Cards’ Major High-Tech Companies Agree To Set Of Technical Guidelines

Associated Press

In a global push to make “smart cards” practical as electronic money, MasterCard International Inc. and seven major high-tech companies agreed Thursday to a set of common technical standards for the cards.

The companies aim to create a worldwide standard for making the all-in-one plastic devices, which look like credit cards but are embedded with electronic chips that store information, such as remaining available cash for purchases.

If a single standard is embraced, developers presumably will be encouraged to make a wide range of software, enabling people to use the cards for paying for everything from groceries to phone calls to airline tickets.

The group’s members hailed their agreement as a breakthrough that would spur major U.S. banks to start offering smart cards to Americans by April 1998, finally making the muchdiscussed cards a reality. So far, the cards are only in a small number of test projects in the United States, though they are catching on in Europe.

But the conspicuous absence of MasterCard’s biggest rivals - Visa International and American Express Co. - from the alliance muddied the outlook. Visa and Amex are working on their own projects. And with all sorts of credit and debit cards already in wide use in the United States, banks are wary about buying equipment for processing smart-card transactions.

Nevertheless, group members said their agreement was the first of its kind, with other competitors focusing mostly on “proprietary” technology that doesn’t encourage broad-scale software development.

“We think it’s the most significant breakthrough in the smart card industry that we can think of,” said Barry Hochfield, senior manager of card operating systems for Mondex International Ltd., a London-based software company that is 51 percent owned by MasterCard.

The other companies signing onto the agreement are Motorola Inc., a Schaumberg, Ill.-based maker of smart-card microprocessors; Keycorp Ltd. of Australia; Hitachi Ltd. of Japan; Siemens AG of Germany; Dai Nippon Printing Co. Ltd.; and Gemplus of France.

MasterCard plans to gradually move over its customers, who have about 400 million MasterCards, to chip-embedded smart cards as they catch on in popularity. Smart cards also can be used for credit transactions.

“We expect to see an enthusiastic uptake throughout 1998, not only in financial services, but outside that industry as well,” said Henry Mundt, executive vice president of the Purchase, N.Y.-based company.

Some observers agreed the development was significant.

“It’s a very important historical step,” said Jerome Svigals, a smart-card industry consultant based in Redwood City, Calif. “This is a break away from a proprietary network.”

The single operating system for the cards is just the latest bid by the industry to unify its disparate efforts. Last week, the smart card industry told its members to do more to guarantee the privacy of the volumes of personal information generated by use of computer-chip embedded cards.

The Smart Card Forum, a group of 200 companies promoting the use of smart cards, adopted guidelines urging companies to restrict the use of information contained in the cards.

The guidelines also give consumers a say in use of the information, which can include sensitive financial, medical and other personal data.

© Copyright 1997 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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