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CASHLESS SOCIETY NEAR AS VISA, MASTERCARD LAUNCH 'SMART CARDS'

The cashless society is coming closer as Visa and MasterCard race to turn plastic cards into "electronic purses" to free people from digging for small change.

After more than 10 years of development, Visa USA Inc. Thursday unveiled a stored value card that can be used for small purchases at various stores or vending machines by sliding it through an electronic reader, without needing a signature or identification number.

MasterCard plans to launch its version of the "smart card" next week.

The cards resemble those used to pay for public telephones or subway rides, except that these carry a computer chip and can be used at multiple locations. As the card is used, the exact amount of money is deducted from the chip, and the terminal displays the value remaining on the card.

"Visa sees microprocessor chips as the key enabling vehicle for the next generation of payment technology," said Visa USA President Carl Pascarella. "It takes longer to pull a quarter out of one's pocket."

Three Southeastern banks -- Nationsbank, First Union Bank and Wachovia Bank -- will begin issuing the cards this year.

The cards will appear in their first large-scale test in September at the 1996 summer Olympics in Atlanta. About 5,000 food shops, souvenir stands, telephones and vending machines will be equipped to accept the cards.

Eventually, the cards -- which store $25 to $100 in various currencies -- could be used to pay for parking meters, buses, taxis, toll booths, video games and other items at merchants that do not accept checks, credit or debit cards.

Meanwhile, more than 2,000 Bank of America employees will be able to use the card in April to make purchases at vending machines and in the cafeteria at the bank's San Francisco headquarters. Visa plans a similar trial at its Foster City, Calif. headquarters in May.

MasterCard also will conduct a test before a full-scale launch of its smart card to fine-tune the settlement process and sign on more vendors, said Diane Weatherington, senior vice president of MasterCard.

"We envision that the majority of our cards will be smart cards by the year 2000," she said.

The two credit card giants are racing to dominate the smart card market by replacing small change with plastic.

Of an estimated $8.1 trillion worth of cash transactions done worldwide, 22 percent are for less than $10, Visa said.

"That means a stored value card certainly has a tremendous amount of applicability throughout the world," Pascarella said.

Banks are eager to issue smart cards as a way to cut down on fraud, which has grown with traditional cards with magnetic stripes. Since consumers would take out cash from their bank accounts to store in their cards, banks also would save interest payments.

Falling microchip costs also make smart cards more viable.

Initially, Visa's card will be either disposable or rechargeable. But both companies plan to make the "electronic purse" just one feature of an enhanced credit or automated teller machine card.

"Think of a smart card as a floppy disk that you can add applications to," said Catherine Allen, chairman of the Smart Card Forum, a multi-industry group formed to set global specifications for the cards.

Further down the road, the cards can be upgraded to carry electronic food stamps, drivers licenses, healthcare and frequent flyer information, and even bank account information.

"Merchants are going to like it very much," said Michael Killen, of Killen & Associates in Palo Alto, Calif. "It's another step toward moving us to a cashless society."

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