Visa, MasterCard split on smart cards

The competitors, united on a protocol for credit card transactions over the Internet, are headed in opposite directions on smart cards.

3 min read
Visa and MasterCard, united in their efforts to finalize a protocol for safe credit card transactions over the Internet, are moving in different directions on smart cards.

Visa announced a smart card trial with Bank of America today that will let several hundred Visa and BofA employees make purchases over the Net using money stored on smart cards, plastic cards the size of credit cards with embedded chips. The pilot, slated to begin this summer, will use the Visa Cash smart card scheme.

Meanwhile, MasterCard, which owns a controlling interest in Mondex, another smart card scheme, today said it will back an international effort to rally around an open, secure operating system for smart cards. Visa was not invited to join that effort.

That operating system, called MULTOS (multi-application operating system), has won backing from major smart card manufacturers and chipmakers that supply the semiconductors for smart cards. Card makers Dai Nippon Printing, Gemplus, and Keycorp of Australia, plus chipmakers Hitachi, Siemens, and Motorola also agreed to form a consortium to push and create MULTOS as an industry standard.

The MULTOS group says products will be commercially available in the first quarter of 1988.

Visa, while not in active discussions with the MULTOS group, voiced its support for standards and interoperability, two issues that have hurt smart cards in the United States. Smart cards are more widely used in Europe for financial applications.

"We continue to have conversations with all parties in all markets," said Visa's Gaylon Howe, senior vice president of chip card products.

"We are not trying to create a group where too many are involved," said Barry Hochfield, Mondex senior manager. "We have tried to get sufficient critical mass." Visa was not invited to join the MULTOS consortium, it said, to keep the number of voting members small so that it can do real work in developing the protocol.

But others will be invited to join the core group, Hochfield added, particularly issuers from retail and phone companies. "We would really be looking to have people who join with something different to offer: geographically, which part of the smart card market they represent, maybe different industry issuers of smart cards."

But Mondex and MasterCard insist MULTOS will be available to anyone who wants to use it, not only for e-cash, but for other applications too.

If successful, MULTOS would allow individual consumers to use one card for multiple purposes: e-cash, building security, medical records, access to encrypted data on PCs. Users could personalize their cards and companies could update applications on the card, something now difficult if not impossible to achieve.

Mondex positions the MULTOS initiative as complementary to other smart card standards efforts, and Mondex will work with Sun Microsystems' JavaSoft unit on the next version of its JavaCard API for smart cards.

Mondex also says MULTOS will benefit, not undermine, a European effort called EMV, which would extend the Secure Electronic Transactions credit card protocol to smart cards, as well as a Microsoft-led effort to regularize how smart cards interact with PCs.

The Visa-BofA trial joins a handful of other smart card trials announced in the United States, and Wells Fargo Bank is conducting a similar test in San Francisco using Mondex technology. Visa had a similar trial in Atlanta last year during the Summer Olympics, and both Visa and MasterCard will cooperate late this in in a Manhattan trial involving Citibank and Chase Manhattan Bank.

The trial, to be conducted in the San Francisco Bay Area, will involve 5 to 10 merchants with Web storefronts. Users will download up to $100 cash onto their smart cards from special machines, although one day standard ATM machines might be adapted to put cash on smart cards.

Bank of America intends to experiment starting in July with multiuse smart cards for e-cash, building security, and access to their PCs.

The maneuvering among smart card players comes as the industry prepares for next week's CardTech/SecurTech conference in Orlando, Florida, the largest smart card event held in the United States.

In other developments, France's Schlumberger, another big smart card manufacturer, next week will announce an e-commerce deal with Visa, a smart card that complies with the JavaCard API, and a security application called SafePak that unites Schlumberger's Cryptoflex cards with several smart card readers and software. Australian phone carrier Telstra today said it will spend $78 million to convert its public pay phones to work with smart cards.