Smart card unlocks brokerage for Amex

American Express is entering stock brokerage in Europe using a novel type of smart card. Amex's approach circumvents one of the big problems smart cards present: the absence of smart card readers.

The cards Amex will use effectively turn every telephone and many computers into smart card readers. Instead of data being read directly from the card's microchip by a dedicated reader, these chips - when pressed upon - emit a sound that serves as an identification signal.

A series of tones is sent down the telephone line, either directly through the telephone receiver, or indirectly through the microphone and sound card of the bearer's computer.

The right sound indicates to an Amex authentication server that a legitimate card is in use. Then, to ensure that the right card is not in the wrong hands, the brokerage customer will enter a personal identification number on the keypad of his phone or on his computer keyboard.

American Express is the first European brokerage to use such technology, said Mr Philippe Jeangeorges, director of Amex's Personal Financial Services division (PFS) in France.

PFS, which began in 1991, now has 42,000 customers for consumer loans and mutual funds. PFS began supplying smart cards to an initial 5,000 customers in late January, and later this month it plans to make its new brokerage service generally available.

"Every European Amex subsidiary is waiting for the results of the audio test, to see if they, too, will use the card," said Mr Jeangeorges, referring to the Parisian supplier of Amex's cards, Audiosmartcard International.

France is committed to the system, not merely testing it, he added, explaining that Amex operations in Britain, Germany, Spain, Italy, and Greece are watching developments. The technology appealed to them as a good way to identify customers while they are on the move, Mr Jeangeorges said. By contrast, a system that identifies the caller's home telephone number limits him to one locale.

Likewise, digital certificates - another popular means of identification - are usually resident on one computer, he explained. (Of course, mobile phones incorporating digital certificates are increasingly being used for financial applications, but the Amex approach opens up use to all phones.)

Audiosmartcard was one of just two firms recently displaying such technology at Cartes, the world's largest smart card exhibition, held every autumn in Paris. The other, Elva, won one of the half-dozen awards for innovation granted at the previous Cartes show.

Elva recently licensed a third party to manufacture cards using Elva's approach.

Audiosmartcard has been selling smart cards that emit sounds to identify the bearer since 1996, but says sales really only took off in 1998, when it introduced a more secure sound signaling method.

Mr Gilles Destremau, chief financial officer, says the Audiosmartcard Smartcard sold about 200,000 cards in 1998, compared to 20,000 in the previous two years.

There are several technical differences between Elva's and Audiosmartcard's products.

For example, the noise is triggered on Elva's cards by the humidity of the user's finger; on Audiosmartcard's it is triggered by users pressing on the chip to break its electrical circuit.

Additionally, Elva's card conforms to the International Standards Organisation's (ISO) physical specifications for smart cards and it doubles as a magnetic-stripe card.

The first use of Elva's card will be in a program to rescue drivers of rented cars, which have broken down, said Ms Clara Landry, Elva's marketing manger. Other planned applications of Elva's cards are for prepaid phone cards, Internet access, and Web banking, Ms Landry said.

Elva recently formed a joint venture with France's dominant provider of servers for phone and Web banking, Prosodie.

Audiosmartcard's business development director Damien Boissinot notes that Elva has no cards on the market yet.

Before Audiosmartcard's recent brokerage deal most of its cards were used for telephone cards.

As for Amex, Mr Jeangeorges reckons it has a narrow window of opportunity before other brokerages adopt this convenient method of identification. "I have one year in front of me to develop things and be alone in France," he says.