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Smart-card venture backed
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July 29, 1998: 10:59 a.m. ET
American Express, Banksys, others invest in Proton World International
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NEW YORK (CNNfn) - American Express, ERG, Banksys and Visa International said Wednesday they have invested in the newly created Proton World International (PWI), a company formed by the spinoff of the Proton smart-card technology assets developed by Banksys.
Smart cards are plastic cards containing a microchip instead of a magnetic stripe, giving the card greater memory and making it "smarter" and able to perform more functions.
American Express (AXP) has invested a "significant" amount in the new Proton smart card venture, but a mass market rollout of smart card products remains a few years away, Peter Godfrey, president of American Express Europe, said Wednesday.
Terms of the deal weren't disclosed.
PWI is designed to offer a universal technology for smart cards, making so-called "electronic purses" compatible worldwide. The company plans to support and implement the Global Electronic Purse Specifications (CEPS), to ensure interoperability of smart cards from many different companies.
PWI will continue the licensing and development of Proton smart card applications. Thirty million Proton cards already are accepted in 200,000 terminals in 15 countries.
Armand Linkens, managing director of PWI, told a news conference that the four partners in the new venture decided not to reveal any financial details.
In an interview with Reuters following the news conference, American Express' Godfrey called his company's investment in PWI "significant."
"The chairman of our company had to approve the expenditure," added Allen Gilstrap, vice president of external partnerships and electronic commerce for American Express, when asked by Reuters whether the company's investment in PWI might be in the tens of millions or hundreds of millions of dollars.
Implementing the future
American Express is confident that smart-card technology represents a growth area, but it does not foresee a significant rollout of products in the near future, Godfrey said.
"I think it's a few years away," he said. "But that doesn't mean you won't see some very rapid local deployment" of chip card applications.
Introduction of smart cards for American Express will be constrained both by the cost involved and the company's more pressing need to prepare for the introduction of a single currency in Europe and the millennium, Godfrey said.
In addition, American Express typically issues its charge and credit cards for two to three-year periods, and would issue smart cards to clients as existing cards come up for renewal.
The higher cost of chip cards could be offset by new business opportunities.
"Sure the chip cards are more expensive, but you're creating incremental revenues," said Gilstrap.
Godfrey noted that even though plastic cards account for a large volume of consumer transactions, over 90 percent of transactions still tend to be cash-based.
"When you go to buy a newspaper, a drink, it's a spontaneous payment and it tends to be cash," he said. "A 5 percent shift moving from cash to a card-based product would be phenomenal."
In addition, other opportunities exist. "We are a huge provider of travelers checks," said Godfrey.
Godfrey said American Express plans to compete strongly in the smart card arena, but PWI ensured that competitors would all be able to play on a global scale and compete on products rather than on technology.
He likened PWI to a motorway, where all the players have decided they will drive on the same side of the road all over the world. 
-- from staff and wire reports
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