IBM Plays It Smart: Tests Amex Smart Cards

<H1> IBM Plays It Smart:
Tests Amex Smart Cards</H1>By Ann McNulty

<I>New York </I>- After years of research, American Express is finally planning to pilot a smart card application later this year, teaming with IBM and American Airlines to use chip-embedded corporate cards and gate readers at 21 airports.

An as-yet-undetermined number of IBM and American Express employees will use the 8K smart cards on flights booked electronically.

"It's the first step in what will be a number of pilots on our part regarding smart cards and the T&E environment," said Steve Norman, vice president of electronic traveler marketing for Amex. These tests are expected to continue into next year.

"One of the reasons that the smart cards' time has come is because the standards have been approved by the card vendors, who have the infrastructure to deploy them," said Claude Guay, director of IBM Travel Distribution Solutions, Montreal. IBM is in discussion with other card vendors and several airlines, hotels and car rental companies to begin other pilots as soon as possible.

There is no question that the entire travel industry will be watching this step very closely. While smart cards appear to have the potential to solve many of the industry's data, customer service and flight-delay ills, they require an investment in technology that has to date been too expensive to justify. But if American Express can justify the costs and the user acceptability, it's likely that others will jump on board the smart-card bandwagon.

One issue Amex wants to test is whether travelers will be any more accepting of electronic ticketing if they're carrying an Amex chip card, said Jud Linville, senior vice president and general manager of multinational accounts and corporate services marketing.

"We're trying to put in the building blocks for a set of electronic traveler tools that we think will provide convenience and comfort-maybe psychological comfort for the traveler, but also savings and security that are going to be difficult to match," he said.

In the pilot program, the chips will hold very basic travel data, such as name and frequent flyer number. However, for the future, Amex is studying the possibility of using 64K chips that could hold much more data, such as transactions and loyalty program points.

"We have a longer-term agenda," Linville said. "We think the smart card can be inserted into the entire process, capturing a lot more information and redefining loyalty programs."

Amex formed a Smart Card Center of Excellence last year to focus on "protecting our current business and using the cards to enhance and defend our positions in T&E," said David Boyles, head of the center. Beyond T&E, the center is focusing on smart card infrastructure, stored value and financial services.

Amex officials have been working with the International Air Transport Association and its U.S. affiliate, the Air Transport Association, to ensure that the card tested will meet the draft IATA-ATA standards to be introduced this week at the Joint Passenger Service Conference in Los Angeles.

The smart card subcommittee is expected to present a proposed standard for smart card usage by airlines. The subcommittee agreed that smart cards should contain only static data such as the passenger's name, frequent flyer numbers or other identifiers that could be used to access flight data stored in a computer reservation system, said John Shanley, secretariat for the subcommittee and Air Travel Card director of operations and services.

The subcommittee opted not to require that ticketing data be loaded on the card. On the issue of contact or contactless -whether the chip must be inserted into a reader or can be read by radio signals-the subcommittee voted to allow airlines to make that decision.

In talking with a number of airlines, hotel companies, car rental firms and corporate customers, Amex has found a considerable amount of interest from partners who want to join the test.

A hotel chain is expected to test the smart card, having travelers bypass the front desk and go directly to their room, Linville said. Other corporations, particularly those in American Airlines' hub markets, are likewise anxious to have their travelers participate in the pilot, he said.

For American Airlines, the test at its 21 largest domestic airports is an expansion of its original plan to pilot smart cards at one airport (BTN, July 29).

Rather than using smart cards to replace the existing magnetic stripe on the back of credit cards, Amex is testing smart cards' ability to solve problems for travelers: waiting in line to board airplanes, check in and out of hotel and pickup and return a rental car.

"Travelers also probably want to see integration of rewards programs, and a speeding up by a quantum amount of the transaction capacity of rewards programs and the way they work," Norman said.

"The test for us is, can we insert this card in the process where things are not optimal today?" Linville said. "On the airline side, maybe we can help them lower distribution costs on some of the passenger revenue accounting or gating procedures, so we can help companies achieve savings. Or perhaps we can help ensure that companies get their corporate negotiated rate at hotels."

Linville also pointed to the fraud issue as one the smart card could address. "There is a fair amount of fraud in electronic ticketing today; can we have an impact on that with a slightly more intelligent card?" he said.

At IBM, frequent travelers who travel specific city pairs where American has the card readers will be tapped to test smart cards. Also likely to test the cards are other IBM employees who have been working on smart card development with Greg Conley, general manager of the travel and transportation group, and Amex employees.