MADISON, Wis. – It certainly wasn't without its glitches or problems, but a recently completed smart card alpha pilot test by CUNA eCommerce shows there may still be a glimmer of hope for smart card applications in credit union land. Employees of three large credit unions – the $3.6 billion Pentagon FCU, Alexandria, Va.; the $1.9 billion Patelco CU, San Francisco; and the $819 million GTE FCU, Tampa, Fla. – participated in the alpha pilot "This is just the alpha phase. It was a proof of concept, ease of use test. It confirmed a lot of things for us," said Doug Benzine, vice president of eCommerce for CUNA. What it confirmed wasn't all good news. For one, it confirmed that installing the smart card reader is not for the faint of heart. "We knew going in that the difficulty in the whole process was the reader. They told us that the installation was the biggest issue. You have multiple operating systems out there. Some PCs come with drivers that others don't. Most people don't even know what a serial port is," said Benzine. The serial port is where the smart card reader needed to be plugged in. The CUs basically gave employees three components – a smart card, the smart card readers, and instructions – and let them figure out the rest. It was designed to show how the average consumer, with no personal guidance, would do in installing the system. Once the rocky installation phase was through the participants were left with a smart card that had five components – MyProfile, which held user's identifying information; MyWallet, an e-wallet that could store credit card account numbers and track purchases; MyContacts, a virtual address book; MyFavorites, which stores the user's favorite Web pages; and MyAccounts, a link to CU services, typically the Web site and online services. "They liked the applications that were loaded on it. Everybody is looking for the one compelling use. We found that people want a stored value feature built in and loyalty programs, where you get a discount by using it with certain merchants," said Benzine. CUNA eCommerce set up a Web site dedicated to logging participant's feedback. Benzine said CUNA eCommerce does believe there's a market for this in credit union land, because it was the CUs that forced its hand with this pilot. "I didn't budget a penny for this this year. We didn't anticipate this coming for at least three to five years. But we had so many requests from credit unions, we had to do a validation pilot." The pilot cost CUNA eCommerce between $50,000 to $100,000. It partnered with SunStar and Touch Technology, and used a Microsoft-driven smart card. Patelco CU was one of the key test credit unions. It had about 15 participants -ranging from a technology executive to front-line staffers – pilot the technology. "We gave it to a real cross-section of employees. They were on different ends of the technology spectrum," said Scott Waite, senior vice president and CFO for Patelco. Waite validated Benzine's comments – users had a tough time installing the readers. "All participants had difficulty with the installation. This is not something the average consumer can take to very quickly," said Waite. "When they got through the installation, several of them thought there was some promise to the concept," said Waite. "We're going to continue to move forward with the smart card at Patelco, but for internal purposes. We've put in a new physicality access security system that we are combining with smart card technology and reader proximity technology," said Waite. About 300 of Patelco's employees will soon have to use a smart card to gain access to not only the main headquarters, but also their desktop PCs. Waite thinks smart cards have potential in credit union land. "I think credit unions are viewed as the trusted advisors, so one application is privacy, to the degree we can use smart cards to protect member data," said Waite. He noted that one of the CUs that participated in the pilot is basically anti-account aggregation because the member is forced to keep all of their critical information stored on an aggregator's servers. That credit union would be open to offering aggregation if the smart card could be used to store critical account and password information, showing yet more potential for smart cards. The major problem that this pilot flushed out – difficulty installing the readers – may be solved by PC makers. A number of PC makers, including Compaq, said they will soon be manufacturing computers that incorporate smart card readers into the PC's keyboard. "Large manufacturers are saying 2002 is the year smart cards will have a large acceptance or it will be pushed back a few more years. The market is ramping up. No one knows where it's going," said Benzine. Mammoth credit card issuer Providian is having success with its smart card program. It recently announced that it has issued over one million smart cards in the U.S., after just nine months since launching a co-branded smart card with Visa. On the retail side, Target became the first major retailer to jump in the space. It said that it will team up with Visa to offer Target smart Visa cards. That's a boost to the profile of smart cards given that Target has over 1,300 stores in 46 states. Both Benzine and Waite said the one thing smart cards definitely have going for them is they are still viewed as a potential tool for cutting down on consumer fraud involving credit cards and other financial payment vehicles. CUNA expects to have a beta smart card pilot late this year or in first quarter 2001. [email protected]

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