Chip Card Debate Gets Philosophical, Historical

By Kutler, Jeffrey | American Banker, December 23, 1998 | Go to article overview

Chip Card Debate Gets Philosophical, Historical


Kutler, Jeffrey, American Banker


By JEFFREY KUTLER In a recent, politically charged panel discussion on the merits of competing smart card technologies, executives of American Express and MasterCard reached back into history for a couple of big guns.

They drew quotations from strange bedfellows-Niccolo Machiavelli and Mahatma Gandhi-which seemed only fitting for a feud that can sound at times hopelessly technical and divisive, at others civil and diplomatic.

As reflected in the discussion at the Cardtech/Securtech West conference, Visa International has placed bold bets on a couple of technology specifications, including one based on the still evolving Java Card standard from Sun Microsystems Inc., in full confidence of winning ample future rewards.

MasterCard International and its Mondex subsidiary, with a well evolved and documented standard of their own already in place, remain steadfast in questioning and opposing just about everything Visa does.

"Honest disagreement is often a good sign of progress," said Gandhi as invoked by MasterCard senior vice president Richard Phillimore.

American Express Co., not being an association but rather intent on asserting its own instincts and interests as a card issuer, sees some merits on both sides and argues for ever more "openness" among the technologies.

It was W. Jody Gray of American Express' smart card center of excellence in Salt Lake City who read from Machiavelli's "The Prince": "There is nothing more difficult to carry out, nor more doubtful of success, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order."

No wonder the convergence toward a common operating platform has been deemed inadequate by just about everybody who cares. Even though plenty of agreement in principle can be gleaned from MasterCard and Visa public statements, they have not yet dealt with specifics at the negotiating table.

Nor is the current state of affairs anywhere close to the open-standards principles espoused and embraced in other corners of the technology world.

Somehow, the struggle between the beta and VHS videocassette standards got resolved-in favor of VHS and at considerable cost to Sony Corp. and its Betamax strategy.

Somehow, DOS and later Windows became de facto standards for personal computer operating systems, and the rest is Microsoft Corp. history.

Somehow, entertainment industry rivals will come to agreements in mutual interest for delivering music and other copyrighted content over the Internet and on new media like digital video disks.

Unless the bank card organizations similarly draw the right line at where to agree not to disagree, they are in danger of perpetuating the kind of "standards war" from which "there could be no winner," said University of California professor Hal R. Varian.

"There can be such a thing as too many standards. It can stifle innovation," said Mr. Varian, dean of U.C. Berkeley's School of Information Management and Systems and co-author of the recently published "Information Rules: A Strategic Guide to the Network Economy."

Mr. Varian made that comment after delivering a speech to Cardtech/Securtech West. Conference chairman Ben Miller gave Mr. Varian a keynote slot at the San Jose, Calif., meeting for an obvious and pointed reason. Mr. Miller wondered later whether the message was heard.

"We need to step back and evaluate some of the issues that affect how the technology will be rolled out-and whether it will be rolled out," said Mr. Miller, who has been running the Cardtech/Securtech conferences for seven years and sold his company to the newsletter and magazine publisher Faulkner & Gray a year ago. (Faulkner & Gray is a subsidiary of Thomson Corp., as is American Banker.)

Mr. Miller said the smart card industry has had considerable success "serving closed environments," whether college or corporate campuses or city transit systems or other relatively confined networks where electronic purses, with monetary value stored in the cards' chips, are accepted as cash replacements. …

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