Magazine article American Banker

Visa Grabs for the Smart Card Lead

Magazine article American Banker

Visa Grabs for the Smart Card Lead

Article excerpt

In the seesaw battle between the two major bank card associations for leadership in smart card technology, Visa seems to have the upper hand - at least for the moment.

With a series of announcements last week, including plans by three member banks to issue chip cards next year in Atlanta, Visa advanced what had been mostly a technical discussion to the level of market activity.

Not to be outdone, MasterCard International said it would make a significant announcement of its own this week, perhaps seeking to win back the initiative it had gained when its board voted last summer to mandate a move toward smart cards.

At that time, Visa kept silent.

MasterCard seemed to build its momentum in September by announcing that its first smart card application would have stored value, with tests beginning this year.

When apprised of MasterCard's scheduled product announcement, Visa responded, "What product?"

Visa has now put the finishing touches on its own smart card strategy, which it characterizes as a migration to - rather than a mandate of multiple-application cards bearing a chip.

"I think it's the most significant strategic position in (the) last 20 years," said Carl Pascarella, president and chief executive officer of Visa U.S.A. "In essence, what we're talking about is not a change in technology. We're moving from a credit environment to a relationship environment, and technology migration from the magnetic stripe to the chip is going to take us into this next level of awareness. It's going to allow us to be the key to the bank."

In a one-two punch last week, Visa introduced its first smart card application - also a stored-value card that will be marketed as a replacement for cash - and unveiled its overall strategic direction.

"We look at the chip not as a product or a service but rather as a technology," Mr. Pascarella said. "In order to have this technology migrate to a level of success we have to be sure it provides consumers with products and services that are adding value."

At a press conference last week, Visa officials said they are ready to deliver to member banks the technologies, products, devices, financial and information services, and systems needed to move to relationship-based products and services using microchip technology.

Also, Visa has begun arranging stored-value pilots in all five of its regions.

First Union Corp., NationsBank Corp., and Wachovia Corp. will participate in a stored-value card program during the 1996 Olympic Games in Atlanta.

First Union also said it would begin a citywide, open-system launching of the smart card in Atlanta in September 1995, with more than one million cards and at least 5,000 merchants.

NationsBank said it would begin issuing stored-value cards later this year in Georgia and Virginia.

Next month, the Bank of America unit of BankAmerica Corp. will begin issuing stored-value cards at Visa International headquarters in Foster City, Calif. More than 2,000 employees will be able to use the cards to make small purchases.

"I think sometimes it's a disservice to everybody to talk about technology without talking about the consumer need we're trying to fill," said Scott P. …

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