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Visa readies wireless smart cards

The credit card company fits out smart cards with radio-frequency chips to allow commuters and others to make hands-free transactions.

Visa International is making a push with a new smart-card payment system that would allow hands-free transactions.

The credit card company said Thursday that it plans to set up a new system that uses smart cards fitted with radio-frequency chips (sometimes called RF identification, or RFID, tags) that will allow people to conduct a transaction, such as paying a subway fare or buying a soda, without having to fish for change or swipe a credit card.

Visa, which will install the first such system in South Korea, says wireless smart cards have the potential to make life easier for a range of users, such as commuters, who could use a card to pay their fare at subway turnstile instead of standing in line to buy a token. People would hold the card--or phone or other device containing a card--within about 10 centimeters of a terminal, which would use wireless transmissions to send payment information.

The new smart cards will use wireless chips that conform to an international wireless standard known as ISO 14443. Companies can work with Visa to add similar capabilities to their handheld devices, such as cell phones, Visa said.

The credit card company says it will use wireless smart cards as part of a larger effort to allow its customers to carry out transactions more easily and more securely.

"Visa's vision of universal commerce, or u-commerce, enables people to decide when, where and how to make a payment," Sue Gordon-Lathrop, Visa's vice president for emerging consumer environments, said in a statement. "This latest effort and other compelling initiatives tied to chip and magnetic stripe technologies move us closer to our goal of displacing cash."

But despite their popularity in Europe and Asia, smart cards have yet to catch on in the United States for consumer purchases. Several U.S. government agencies, including the Federal Aviation Administration, plan to use smart cards for identification and for access to buildings and computer networks.

Visa sees a wide range of potential uses for smart cards as Americans overcome their preference for cold cash; these include paying for parking, buying gas at a service station and getting a snack at a vending machine. Each transaction can be set up to follow a typical payment process, with cardholders providing a signature or personal identification number to verify their identify, if necessary.

Visa is working with several companies, including Cybernet, Ingenico, Philips Semiconductors, SchlumbergerSema and Smart Card Systems, to put the new payment systems into place.

Philips Semiconductors, which manufactures a wide range of chips that go into smart cards, believes that wireless smart cards have great potential because of their low cost and convenience. Philips' range of RFID tags mark the identity of an object and use wireless to broadcast information such as its location.

Some versions of the tags, those most likely to be used in smart cards, pair RFID with the ability to store and encrypt data. These chips cost a few dollars, while the terminals that read them cost less than $100 each to build, according to company executives.

"The whole smart card and RFID tag business is very interesting," Scott McGregor, CEO of Philips, said in a recent interview. "It requires some pretty tricky technology to do. But the neat thing is that you can build tags that have memory. Some of our tags have (security) co-processors in them, so they're cryptographically secure. You can use them for anti-counterfeiting. You can use them for inventory tracking. We really see them becoming popular."