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Smart cards not smart enough

Visa calls for more talented hardware to usher in a card-controlled future.

Visa, the huge credit card conglomerate driving the adoption of e-commerce, told its hardware and software partners today that multifunction smart cards, along with a generation of new devices and software applications to take advantage of them, will be necessary to bring about a card-controlled future.

The reason, it turns out, is that the basic financial applications available today on smart cards, which serve as intelligent personal identification and information cards, do not appear to be a strong enough enticement for the general public.

"The test with stored [money] value cards succeeded but did not prove itself to be an excellent business case," said Phillip Yen, senior vice president of chip platforms at Visa. "The thinking now is to build on making the credit and debit cards more attractive" by adding additional functions such as building-access functions or applications that will allow customers to use different currencies on one card. The cards, devices, and applications, moreover, will all be based on Java to promote flexibility.

"Smart cards work best when they can be used several times a day," Yen added. "We would have failed miserably if all that [smart cards] were supposed to do were financial applications."

While multifunction smart cards have long been discussed, Yen's statement at Visa's annual partner summit in Foster City, California, made it clear how the smart card industry would develop.

Smart cards are plastic, credit-card size devices with a microchip. Although capable of storing a variety of data, they have primarily been used in the U.S. in limited trials, mostly in the financial arena. The software system varies on cards and devices at the moment, although many manufacturers are incorporating Java, a sort of computer lingua franca, to promote interoperability.

Multifunction smart card pilots will start to take place next year. The JavaCard 2.0 specification, which manufacturers are expected to adopt, is due in October. Prototypes of JavaCards will appear in early 1998, while pilots complete with smart card reading devices and applications will take place in the second half of next year.

Ironically, the early mixed results for smart card demand will likely strengthen the market for the future. The anticipated demand for multifunction cards gives incentives for hardware vendors to come up with multi-use cards and card readers, which in turn should prompt software vendors and system integrators to provide more applications and services.

"Our product mix will have to accelerate," said Robin Abrams, vice president and general manager of Verifone. The company is in the process of shifting more of its product mix from magnetic stripe card readers to smart card readers, she said. In addition, Verifone expects to come out with multi-application, multifunction readers.

Like Visa, Verifone also plans to evangelize the smart card message to developers. "It's not so obvious that there are opportunities out there for Java developers," she said.

"This is good for us," said Scott Rau, vice president of the financial transaction business division at Gemplus, which makes smart card chips.

One issue that could present some difficulty under the Visa plan is operating systems. Visa is recommending that card and device makers adopt Java for their product but continue to run their own software systems. In this way, the products will interoperate but give an opportunity for manufacturers to differentiate their products, said Yen.

If the pieces fall into place, however, Yen said that the smart cards will essentially replace many of the functions of a PC. "The smart card is the ultimate personal computer and is the third wave of the computer revolution," he said.

Still, the initial trials have not taken off as planned. Smart cards for paying mass transit, he said, were thought to be a silver bullet but have yet to gain widespread acceptance. Deals to make smart cards the access devices for network computers are still in the works, he noted, while NCs remain a new market. And he said the oft-touted electronic wallet is like the stored value card: a good idea, but not one that will become the basis for a standalone business.