Card giant Visa has launched an initiative to get banks to upgrade their plastic, magnetic stripe cards to smart cards, predicting that by the year 2002 one-third of all Visa cards will have a chip on them.
Visa announced a legion of technology partners to help its banks move to smart cards, but banks may get squeezed by divergent Visa and Mastercard strategies.
Visa, an aggressive booster of Sun Microsystems' Java smart-card technology, has made Java the centerpiece of its smart card strategy. Mastercard is pushing its majority-owned Mondex scheme for electronic cash and its Multos operating system for multifunction smart cards.
Mastercard announced two weeks ago that Multos smart cards would be available this spring. Mastercard also contends that applications written in Java can run on Multos.
"We have done 70 smart-card pilots in 30 countries, and we know the technology works," said Visa's David Brancoli, vice president of corporate relations. "Visa feels that banks need to move aggressively on this. We see smart cards as both an opportunity and a threat because of nonbanks getting into the issuing of smart cards."
Although Visa has been promoting smart cards for some time, its new Visa Smart initiative includes 26 vendors that can help banks with implementing a smart-card strategy. Among them are systems integrators Andersen Consulting, EDS, IBM, Sema Group UK, and Unisys.
Analyst Scott Smith, of Current Analysis, boosted both Visa and Mastercard for taking active smart-card roles.
"The tools will have to be put in the hands of the banks by the card associations," Smith said. "Then the banks will have to move swiftly to make a case to merchants and consumers to take the responsibility for jump-starting those markets."
Both Visa and Mastercard stress multiuse smart cards, plastic cards the size of a standard credit card but with an embedded computer chip. Smart cards are in relatively wide use in Europe for electronic cash, but they also can be used for building access, signing on to PCs, loyalty programs such as airline frequent-flyer programs, or for storing medical information on digital certificates or electronic IDs.
However, smart cards require devices called "readers," which are not in widespread use today. Readers can be installed in computer keyboards, vending machines, ATM machines, retail stores, or even counter-top versions in the home, a scheme being pushed by VeriFone, a unit of Hewlett-Packard.
Using smart cards for multiple functions would spread the considerable cost of upgrading or installing smart-card readers to multiple applications, not just e-cash.
Visa contends banks can keep their current customers and add new ones by adding smart cards to their offerings.