Slowly but surely, smart credit cards are taking off in the United States. In less than two years the number of smart bank credit cards in the US has grown from zero to 7 million. This month VISA launched major initiatives to encourage merchants, issuers, and computer manufacturers to get into the game. MasterCard and VISA have begun closing the gap in the systems or platforms that power their smart cards. MasterCard has launched a smart card program with the military. American Express has jazzed up its Blue smart card and is also seeking to expand the functions of Blue.

VISA said its efforts are paying off as bankcard processors supporting 80% of VISA's card volume can now process VISA smart card based payment transactions. While the first phase of VISA's initiative centered around Internet usage of 'smart VISA' cards, by the end of this year many merchants will begin accepting smart card-based payments at physical locations. Top terminal vendors, Hypercom, Ingenico and VeriFone, are leading the drive to encourage merchants to upgrade their hardware and software to accept smart cards. Meanwhile several key merchant payment processors, including Vital, NPC, and First Data Merchant Services, will be able to offer smart card acceptance applications on Hypercom and VeriFone terminal models. VISA is expanding its low cost smart card program for card issuers with the addition of two new products developed in conjunction with Philips Semiconductors. The new smart cards can support a range of payment and non-payment applications. Both products provide hardware-supported public key capabilities. The new products follow the introduction last October of a multi-application VISA smart card costing less than three dollars. The price of the new cards will be $3.56 and, for the dual interface card, $4.67. The typical cost of a card supporting public key capabilities is US$7.00. Two card manufacturers have already agreed to produce the new cards, Giesecke & Devrient and Orga. Five card vendors offer smart cards under three dollars including G&D, Orga, Dai Nippon, Oberthur, and Schlumberger. The new $3.56 smart card will be available in July while the $4.67 dual interface card will be available later in the year.

Further nudging the smart card drive along in the USA, VISA announced it is launching its 'smart VISA Ready' program for smart card-related products such as personal computers. The new corporate identifier, or mark, will denote that smart-card components, devices and services have met a set of criteria to ensure consistent performance and utility. VISA will require vendors, processors and physical POS merchants to undergo a standardized approval process before granting authorization to use the mark. The mark, similar to the highly recognized 'Intel Inside' mark, will appear on device packaging. Compaq Computer Corp. is the first to be approved for the 'smart VISA Ready' mark, and will begin incorporating smart card readers into its consumer PC family. Using the Gemplus reader technology, Compaq will release its new 'smart VISA Ready' computers later this year.

Closing the gap in smart payment card platforms, MasterCard announced this month it will support the 'JavaCard' platform for smart cards along with its continuing support for 'MULTOS'. MasterCard also says it is prepared to support Microsoft's 'Windows Powered Smart Cards' if its members demand it. The decision to support 'JavaCard' will help break the platform logjam for U.S. issuers of both VISA and MasterCard. However MasterCard says its 'MULTOS' platform is more open than ever and as new members have joined the 'MULTOS' consortium, pricing has been simplified. 'MULTOS' recently added a new policy which enables card issuers to build their own facility to authorize application loading and deletion. MasterCard offers the 'M/Chip' family of credit/debit applications for smart cards. Gemplus announced type approval from MasterCard and Europay for delivery of the 'M/Chip Lite' smart card solution, based on the 'JavaCard' platform for its 'GemXpresso' card. Schlumberger Test & Transactions also announced that 'M/Chip Lite' is now available on its 'Cyberflex Palmera' card.

The Navy's new smart payment card is now in a pilot run with 170 crew members of the USS RENTZ. The smart MasterCard was developed by Chase Manhattan. The 'Navy Cash MasterCard' uses a chip to store value for purchases at sea and a magnetic strip for debit purchases and ATM account access. Sailors and Marines can use the e-purse feature to buy items at point-of-sale terminals in the on-board store, post office, morale-welfare and recreation wardrooms and other retail locations. Navy Cash also provides electronic access to personal checking and savings accounts ashore.

American Express announced a three-part program to enhance the music experience for 'Blue' customers while expanding the functionality of Blue's smart chip at physical retail locations. The 'Blue for Music' program offers cardholders: 30% off on featured artists' CDs at Virgin Megastores nationwide and at Virgin's Web site; concert benefits at SFX Amphitheaters; and a special AmEx Web site where cardholders can enjoy music-related content including exclusive MP-3 downloads and artist features. New POS terminals that incorporate smart card readers will be installed in all U.S. Virgin Megastores and will be used to activate the special 'Blue' CD offers. SFX will operate the 'Summer Concerts in Blue' Will Call window, which will be equipped with an AmEx 'Blue' smart card reader, which verifies the cardholder's order.

American Express announced the winners in its contest that challenged Java developers from around the world to create innovative, new smart card applications for potential use on the credit card Blue from American Express. The 'Code Blue' contest was co-sponsored by Sun Microsystems and Oberthur Card Systems. Igor Fisher, of Tuebingen, Germany, will receive $50,000 as the first place winner of the 'Code Blue' contest, earning the honor with his "Pass Keeper" application. Pass Keeper would enhance a user's smart card by storing a portable and securely locked list of Internet addresses (a/k/a bookmarks) together with a user's PINs, passwords, or account numbers that might be required for entering those sites. Sirl Davis of the UK will receive $25,000 as the second place finisher. Mr. Davis' application would use smart card technology for encrypting and gaining secure access to MP3 files and could be extended to other file formats, software, and video games. The third place winners created a Java Card technology application for couponing and electronic ticketing.

Meanwhile, a new study concludes that American Express has issued nearly six million smart cards in the USA since September 1999. The research also found that 50% of the 'AmEx Blue' cardholders revolve balances exceeding $10 billion. Indeed, since the third quarter of 1999, American Express U.S. card loans have grown from $20.6 billion to $30.2 billion and U.S. cards have increased from 29.2 million to 34.2 million according to CardData. The 'AmEx Blue' study by Brittain Associates says it surveyed 3,000 consumers in late March and found that the smart card has attracted a younger demographic but that few cardholders actually use the smart card feature to make online purchases. The study says nearly two million 'Blue' cardholders applied online for the smart card. Brittain found that 6% of 'Blue' cardholders make the minimum payment.

Finally, one of the three issuers of 'smart VISA' cards, Providian, said it has merged its e-commerce products and services under its GetSmart unit and has launched a GetSmart-branded VISA smart card. Providian acquired GetSmart.com, an online loan marketplace, in February 1999 for $33 million cash and has since operated the Web site as a stand-alone entity under its e-commerce division. Providian says it has also expanded the features of GetSmart to include an account aggregation feature called 'Daily View' and an online bill payment service called 'Bill Pay Online'. GetSmart's core functionality resides in its 'SmartMatch' technology, which matches borrowers with qualified lenders whose product offerings meet their specific needs. The new 'GetSmart smart VISA' card is being offered in three levels: 'Classic', 'Gold', and 'Platinum'. The 'Platinum GetSmart VISA' offers a 3-month 0% intro rate, followed by a prime +1.99% APR. The 'Gold GetSmart VISA' offers a 2-month 0% APR with a go-to rate of prime +6.99%. The 'Classic GetSmart VISA' carries a prime +12.49% rate after a two-month 0% intro APR. All three versions have no annual fee. An optional rewards program is available for $48 per year. The 'Bill Pay Online' service offers payment of up to 15 bills per month for $6.95 a month.

Clearly 2001 is the year for the U.S. to Get Smart!

Worldwide, smart card shipments totaled 628 million units for 2000, a 45% increase over 1999. Two vendors, Gemplus and Schlumberger, continue to dominate the worldwide market with combined shipments accounting for 54% of total smart card units. If memory cards are included, the combined market share for Gemplus and Schlumberger would be nearly 67%, according to Gartner's Dataquest survey. Last year, Gemplus shipped 185 million smart cards while Schlumberger shipped 152 million. Oberthur shipped 85 million, Giesecke & Devrient shipped 76 million, and Orga shipped 53 million smart cards. VISA now has more than 80 smart card programs in 35-plus countries and on the Internet, and has issued more than 42 million smart cards worldwide.