THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, August 14, 1995 TAG: 9508140090
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Long : 233 lines
We've all been there: the emergency room on a Saturday night. You're ready to curl up and die under your stiff-backed chair when some clerk comes over and shoves a clipboard in your face.
``Fill this out,'' she says.
Imagine dragging out of your wallet a little card with a computer chip on it and handing it over instead. All the information the hospital needs - your name, address, Social Security number, blood type, allergies - are right on the card. The clerk plugs it into a special reader and downloads everything electronically.
Voila. You're on the way to the triage nurse.
``No hassles. Nobody asking, `Is that Miller with an M?' '' says Ben Miller, editor and publisher of the newsletter Personal Identification News in Rockville, Md. ``Wouldn't it be nice?''
Yes, it would. And it's just a matter of time.
Smart cards - wallet-sized cards with microchips built in - are already common in Europe and Asia. More than 1 billion of them have been circulated in those continents in the last 15 years.
In Germany, they're loaded with insurance information to help individuals navigate through the health-care system. In France, they've replaced coins in pay phones. In Japan, they're used by car owners to store auto-maintenance records and pay for repairs and gasoline.
Now, the United States is jumping on the smart-card bandwagon. Before the decade's out, smart-card advocates predict most Americans will carry one or more of the cards, using them for everything from ticketless air travel to ordering up a cappuccino from the cafeteria hot-drink machine.
If these enthusiasts are right, smart cards will nearly make coins and small bill obsolete and greatly reduce the clutter of ID cards in our wallets.
They may be right. Already, the nation's two largest credit-card companies, Visa and MasterCard, are cooperating to develop smart-card standards. Big banks, phone companies, retailers and a slew of state and federal agencies are experimenting with the cards.
The big test for smart cards in the United States will come next summer at the Olympics in Atlanta. There, First Union Bank, NationsBank and Wachovia Bank plan to circulate millions of ``stored-value'' smart cards. Olympics goers will be able to buy the cards in various electronic denominations, then draw against them to quickly pay for sporting events, meals, souvenirs and other things.
The chip on the smart card will automatically subtract the value of purchases and tell users how much spending power they have left. Users will even be able to recharge the cards with more value at bank teller machines.
``Atlanta will be the showcase for the use of smart cards in the United States,'' says Bob Gilson, executive director of the Tampa, Fla.-based Smart Card Forum, a trade group.
Companies with operations in Hampton Roads are smack in the middle of the smart-card push.
The Charlotte-based NationsBank has its credit-card processing center in Norfolk, and that center's employees are scheduled to test stored-value smart cards this fall - possibly to pay for meals in a cafeteria.
In Williamsburg, a little company called 3-G International Inc. is helping the Defense Department test smart cards with personnel in Hawaii. If that goes well, all 1.6 million active-duty personnel could be carrying the cards by 1999.
And in Chesapeake, about two dozen employees of the French conglomerate Schlumberger Ltd. are strategizing to make their company the top U.S. supplier of smart cards and related computer systems.
Schlumberger is supporting Charlotte-based First Union's ambitious smart-card plans. And it has helped many other smart-card issuers, from the Aspen, Colo., parking authority to the National Football League's new Jacksonville Jaguars.
James J. Davis, North American vice president and general manager for Schlumberger Smart Cards and Systems, has a modest goal. ``If we get one card in everybody's wallet,'' he says, ``I'll be happy.''
Davis is a West Point graduate, a buttoned-down type who ran a semiconductor-testing operation before joining Schlumberger three years ago. The man oozes understatement. But about smart cards, he's giddy.
``We think the smart card will have a higher impact on the consumer than the introduction of the credit card,'' Davis says.
Smart cards sprouted in France around 1980. The technology-infatuated French took to the cards right away, and soon cards loaded with pre-paid value had all but run coins out of the country's pay phones. Other chip-embedded cards soon surfaced: for everything from automatic tellers to movie admissions.
Meanwhile, other countries took up the cards and invented their own uses. But only in the past few years has there been much interest in smart cards in the United States.
Why the lag? America's advanced telecommunications infrastructure already gives retailers that accept credit or debit cards with relatively low-tech magnetic stripes near-instantaneous assurance that the transaction is acceptable. So the business argument for still another money card - even one loaded with a chip that could hold many times more the amount of information - was slow to form.
Lately, however, smart-card advocates are zeroing in on an opportunity they think will supercharge their industry.
It's all that loose change and small bills we now carry for the numerous small-sum transactions we engage in every day: 50 cents here for a newspaper, $5 there for lunch at McDonald's.
All told in the United States, they add up to an estimated 225 billion sales each year for amounts less than $20.
Companies like Schlumberger are heavily focused on developing technologies and marketing alliances that will let us carry smart cards instead of cash for all those little purchases.
They think Americans will even pay annual fees for these stored-value cards, as they do now for credit cards.
If they're right, within the next decade, tens of millions of Americans will tote ``electronic purses'' of the type to be issued at the Olympics. Such cards could be plugged into newspaper boxes or vending machines or handed to the cashier at the fast-food takeout window.
The ``cashless society''?
Not quite. ``More like the less-cash society,'' says newsletter publisher Miller. Cash will never be done away with, he says.
But as stored-value cards become more accepted, he predicts they'll pave the way for other smart cards.
And eventually, advocates say, the move to chip-based cards could enable Americans to carry fewer cards altogether.
By the turn of the century, experts predict smart-card chips will routinely carry 64 kilobytes of information. That's 64,000 characters or more than 1,000 times the amount of information now squeezed onto the magnetic stripe of a typical credit card.
Technologically, then, there's no reason why driver's licenses, Social Security cards, draft cards, unemployment and welfare benefit documents, and library and voter's registration cards couldn't all be consolidated into one card.
The biggest obstacle to smart cards' deployment is the billions of dollars in up-front costs that credit-card companies, banks and retailers may face to re-engineer the nation's transactions infrastructure for chip-based cards.
There are more than 2 million electronic point-of-sale terminals alone in the U.S. The number of off-line vending machines, newspaper boxes, buses, ferries, toll highways and laundromats that could potentially be fitted to take smart cards is far, far greater.
Then there's the 100 million or so U.S. households that some dreamy card pushers foresee someday having their own personal smart-card readers, hooked right into their telephones or TVs.
Privacy is a potential stumbling block, too.
With their potential for storing the equivalent of whole piles of personal information on their holders, smart cards are bound to invite snooping, says Robert Ellis Smith, publisher of Providence, R.I.-based Privacy Journal.
``It will be important for card issuers to compartmentalize data,'' he says. That way only the information that is necessary to complete a specific transaction is revealed to the company or organization into whose reader a card is plugged.
Security is another concern. Fraudulent use of credit cards already runs well into the billions of dollars each year.
Smart-card advocates say they're sensitive to the worries. They contend that smart-card data can be segmented to prevent prying. And they say they're developing schemes - everything from hand scans to voice-verification techniques - that will make future cards far more fraud-proof.
Privacy Journal's Smith actually likes the idea of smart cards. The cards ``should put more control of information about themselves into individuals' hands,'' he contends.
But it will be important for people to make sure the information in their portable electronic data files is accurate. ``Otherwise,'' Smith says, ``these cards could be walking time bombs.''
On the front lines of the smart-card push, at Schlumberger's two-story suite on Chesapeake's Greenbrier Circle, such weighty issues get relatively little attention. Deal-making and making good on deals drive the day.
This year, Schlumberger has already bought two U.S. companies to shore up its position in the field. And it has landed some important contracts that are keeping its Chesapeake crew of software and electrical engineers busy juggling mind-bending algorithms and drawing the inner workings of new computer peripherals.
Davis is hoping one of his crew's projects - the Jacksonville Jaguars' stored-value smart-card program - will lead to others with sports teams. The first in the NFL, it will let fans use the pre-paid cards throughout the football stadium.
Schlumberger is also helping the University of Michigan and Western Michigan University equip their 70,000 students with multi-application smart cards for the coming school year.
But the Schlumberger workers' big emphasis is the Olympics. With Schlumberger's help, First Union plans the Atlanta rollout as the springboard for a major smart-card drive throughout its banking region.
Any concerns that smart cards will flop?
To the contrary, Davis says. ``The Olympics,'' he crows, ``will put us over the top.'' MEMO: [For a related story, see page 11 of THE BUSINESS WEEKLY for this
date.]
ILLUSTRATION: [Cover]
SMART CARDS: THE NEW CURRENCY?
PHOTO ILLUSTRATION BY VICK[I] CRONIS/Staff
Michael H. Smith, left, and James J. Davis are executives at
Schlumberger Ltd.'s Smart Cards and Systems operation in Chesapeake.
Behind them is the image from a smart card to be used at concessions
stands by fans of the National Football League's new Jacksonville
Jaguars. Smith previously worked in France, where smart cards were
born. He predicts Americans will become as infatuated with the cards
as the French.
Vicki Cronis/Staff photos
Smart-card reader.
What are they?
Smart cards are essentially small computers. The size and
thickness of credit cards, they are embedded with a microchip that
stores far more information than can be contained in the magnetic
stripes now typical on credit cards. Within five years, experts say
a typical smart card will have more than 1,000 times the
data-storage capacity of today's typical magnetic-striped card.
What are they used for?
Here are just a few of the current U.S. applications for smart
cards:
Ticketless air travel. Delta Air Lines' experiment on its
Northeast shuttle lets passengers use smart cards to reserve
flights, pay for their tickets and get automatic credits to their
frequent-flier accounts. The cards are plugged into special readers
at the airline's gates.
Trade shows/conventions. Galaxy Registration Inc. of Frederick,
Md., issues smart cards to delegates to events it helps organize.
The cards contain detailed information on the delegates and can be
plugged into readers at exhibitors' booths to request follow-up
mailings or phone calls. They are also used in place of tickets for
meal functions and seminars.
Welfare benefits. The state of Wyoming is testing the issuance of
smart cards to families enrolled in the Women, Infants and Children
and food-stamp programs. The cards are pre-programmed to dictate the
exact foods that can be purchased at supermarkets. The state of Ohio
is planning to use smart cards statewide in its food-stamp program.
Farm programs. The U.S. Department of Agriculture issues smart
cards to peanut farmers. The cards are used to store quota and sales
data and have replaced piles of paperwork that farmers formerly
toted.
KEYWORDS: SMART CARDS by CNB