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Smart cards descend on N.Y.

New Yorkers get first dibs on using smart cards for home banking with private smart-card readers from VeriFone.

New Yorkers will get the first shot at using smart cards for home banking with private smart-card readers from VeriFone (VFI).

VeriFone already makes most of the countertop "swipe" machines used by retailers to authorize credit card purchases. Today it announced a deal with Citibank (CCI) to distribute Personal ATM devices to thousands of Citibank customers in a pilot program due to launch by year's end.

The in-home smart-card readers will be distributed as part of a broader smart-card trial that Citibank is conducting with Chase Manhattan Bank, (CMB), Visa, and Mastercard. Involving 50,000 customers, it will be one of the largest U.S. smart-card trials to date. Smart cards are already popular in Europe.

VeriFone, meanwhile, today announced a jump in first-quarter profits to $7.2 million, or 30 cents a share, for the quarter ending March 31. That compares with $6.7 million, or 26 cents, a year ago.

Revenues rose to $116 million for the quarter, up from $102.9 million a year earlier. The company attributed the increase in sales to rising demand for its enterprise systems and Internet commerce products, such as Omnihost 3.0 enterprise software and vGATE Internet gateway software.

Another element of the pilot will get smart-card readers into the hands of more than 500 merchants on Manhattan's Upper West Side. The idea is to give consumers places to spend the electronic cash (or "stored value") they move onto their smart cards from their bank accounts.

Using VeriFone's terminals, Citibank customers will be able to download electronic cash to smart cards in their homes or offices.

"We have always felt that getting cash at home would be the icing on the cake of home banking," said Henry Lichstein, the Citibank vice president responsible for smart cards.

The Manhattan trial has drawn attention because it will test the interoperability of two incompatible kinds of e-cash on smart cards, VisaCash and Mondex, in which Mastercard bought a controlling interest late last year.

But Rod Kuckro, editor in chief of the Report on Smart Cards newsletter, played down the significance of the VeriFone deal.

"There's no U.S. market for smart cards today, so readers are mostly done by large European players," Kuckro said. He mentioned Gemplus, Schlumberger, and Motorola's new smart-card division, due soon.

Kuckro thinks that the Manhattan trial will produce little market data that can be generalized because it involves such high-income users.

But VeriFone's Tom Kilcoyne, speaking by phone from Singapore where he's working on another deal, said the Citibank deal validates both the company's Personal ATM and its broader VeriSmart architecture, software that could work with any of the competing smart-card architectures.

"The fact that a pilot is rolling out is a huge point for VeriFone," said Kilcoyne, general manager of the company's consumer division. He expects more smart-card deals in the next six weeks, including ones in Europe and Asia.

Smart cards are the same size as conventional bank cards but contain an embedded chip that can store money, personal information, cryptographic keys, or other data.