As last year ended, the most ambitious attempt yet made to introduce smart cards to the US ended with it. After 15 months, a pilot programme in Manhattan's Upper West Side which included Visa and MasterCard, the two largest global bank card associations, along with Citibank and Chase Manhattan, New York's two biggest banks, was abandoned.
The smart card readers installed with retailers in the area are now being removed, ensuring that the Mondex and Visa Cash cards distributed during the pilot will not be the basis for a national system of smart cards, using embedded chips rather than the traditional magnetic stripe.
The abandonment of the trial was a blow for the smart card industry because of its implications. Although smart cards have been used successfully in closed environments in the US, such as universities, chip card makers have yet to crack the US market as a whole. This raises the rare prospect of the US being left behind by a technological revolution which is sweeping the rest of the world.
That, in turn, could hit smart card users. Problems in developing the US market would hamper attempts to add extra functions to the smart cards already carried by international travellers from Europe.
"The Europeans and to some extent the Asians are getting a bit frustrated with the US moving so slowly. I think that is going to create some interesting tensions," says Malcolm Williamson, who last year took over as chief executive of Visa International.
In the Manhattan trial, neither retailers nor customers warmed to the cards, which never generated the hoped-for volumes. The world's financial press, being on the doorstep, naturally witnessed and reported the trial, usually in terms of doubt.
All involved seem to agree on one lesson - that "stored value" alone was not enough to persuade New Yorkers. The cards allowed users to load money on to the chip from their normal ATMs, and spend it at retailers. Copious advertising told them this would cut the amount of loose change they would need.
Williamson attributes the US reluctance to move to chip technology to the fact that it had built an infrastructure for magnetic stripe cards before the rest of the world, and had cheap telecommunications to back up the stripe cards. There is little economic incentive to change.
There were also more specific reasons for the New York pilot failure. The banks were asking consumers to put yet another piece of plastic into already overflowing wallets, and future smart card pilots will probably rely on existing magnetic stripe cards with chips added. (Consumers expressed similar concerns about having to carry another card during the Mondex trial at Swindon in Britain).
IN future, suggests Richard Phillimore, MasterCard's head of smart cards, the association will ensure it can make guarantees to customers - such as that the cards can be used in all branches of a retail chain, or in any launderette, or at every station in a rapid transit system.
But Visa and MasterCard seem unlikely to collaborate on any similar joint venture in the near future, and they are locked in an acrimonious argument over standards.
An important objective of the pilot was to test "inter-operability". Two systems - Visa's Visa Cash and MasterCard's Mondex - were tested. Both operated on the same equipment.
This technology worked. However, Visa officials said retailers had complained about the complexity of going through two different processes for the two cards, and called for a move to a common electronic purse standard. However, MasterCard believes the technical success of inter-operability in New York provides sufficient standardisation, and that different systems should continue to be developed separately.
Visa, on the other hand, wants more standardisation. Williamson describes Mondex as "one of many potential operating systems", and adds: "The best thing that could happen is that it is made to operate on the open operating platform."
He believes that global standards would help stimulate competition, which would then be defined by whatever functions banks put on the chip. And he draws comparisons with the growth of the magnetic stripe, which also required a common standard before it became popular.
The issue is important because of the infrastructure costs involved in building a new smart card network. Banks will be reluctant to build a network of smart card readers if there is a risk they could quickly be superseded. But without broad acceptance for chip cards, consumers are unlikely to use them.
Smart cards will allow banks to extend their relationships with customers. "If you have an international traveller from Britain in five years' time who is used to a chip, but when he gets to America he has got to use a magnetic stripe, he may not feel he is getting the best service. There is all sorts of peer group pressure on this."
And both MasterCard and Visa believe they can see a "killer application" on the horizon - payments over the Internet. Phillimore suggests that smart cards will be ideal for e-commerce, because they allow an individual's identification to be made portable. Using a smart card reader, a user can sign in to a secure web site from any terminal.
It also has the advantage that it can easily be used for very small payments. At present much information on the internet is free, he says, simply because it would be too difficult to charge small sums for it. Smart cards would change that.