Get smart: The dawning of a new age in financial techology takes root in rural Bolivia. (Connection).

The bus trip La Paz to the small market town of Batallas is just 60 kilometers, but in Bolivia that's enough to take you back centuries. Modem life in the country's capital melts away to scenes of native Aymarans guiding ox-drawn plows across small plots of unyielding altiplano soil.

Yet people here will soon witness the arrival of some seriously state-of-the-art technology, something not even tech-savvy U.S. consumers have seen fit to use, although millions already thoughtlessly carry them embedded on credit cards: smart cards.

Technically, smart cards are not cards. Rather, they are the gold-colored chips embedded in walletsized IDs and credit cards. They can he programmed to contain reams of personal data, including spending habits, security codes and financial information.

The chips replace the magnetic strip now found on cards the way a tanker replaces a tugboat. Memory is so much deeper that its boosters think smart cards could displace bulky personal digital assistants, turn dumb cellular phones smart and usher in massive micro-payments systems. So far, its major developers, Gemplus and Oberthur, both of France, have concentrated on industrial solutions like inventory markers, but the dream of mass distribution is definitely part of the program.

In Bolivia, meanwhile, micro-finance institution Prodem FFP turned to the cards to solve problems faced by rural residents. Prodem's savings account holders will use them for transactions in branches and on a network of new, low cost, multilingual rural cash machines to be installed during the coming year.

The chips in the cards hold customers' personal and account details as well as a digital copy of their fingerprints; a reader checks users' fingers prior to each transaction, eliminating the need for personal identification numbers or a passbook. The replacement of four-digit numbers with fingerprints and magnetic strips with chips also adds security, making fraudulent card use more difficult.

The beauty in Bolivia, however, is the chips' capacity to store transaction history. Given the state of communications infrastructure in rural Bolivia, this feature allows the cards to be used on ATMs lacking a permanent telephone connection. Nearly all existing cash machines now depend on an active telephone line to get data and okay cash movements with the bank's mainframe. Instead, each card keeps track of events for its user, and the machine's attendant downloads activity logs when money is replenished.

The first of the card-based ATMs were installed in March. But the smart card and fingerprint technology is already in use. Eduardo Bazoberry, head of Prodem, offered cards to 15,000 new savings accounts holders, who now use them throughout Prodem's 54 branches. Bazoberry is confident that the cash machines will be just as big a hit.

"Very low-income people might not read and write so well but they definitely know how to count and they know how to move their money and make their money worth something." Bazoberry says. "So, for them, an ATM is a machine that is going to be well used."

Do-it-yourself. The technology was developed by Prodem in Bolivia. Bazoberry says his company asked IBM to find a way to combine the smart card and fingerprint technology with a cash dispensing machine. But, he says, it told him it needed at least a year and Between US$2 million and $2.5 million to make it work.

Prodem passed and instead went to work on its own, combing a De La Rue cash dispensing system, Gemplus smart card technology and a fingerprint reader made by Digital Persona, a U.S. company. Then Bazoberry set about finding the best software designers in the Bolivia to try to get the parts to talk to each other.

Less than a year later the prototype smart card ATM was going through final testing and Innova, a company formed by Prodem to develop the machine, was ready to go into production with cash machines that cost $15,000 to $20,000--nearly half the price of new standard ATMs.

One measure of the success of Prodem's smart cards is the $4 million deposited in savings accounts so far by some of Bolivia's poorest people. Bazoberry expects that figure to triple by the end of 2002. "We believe that in rural Bolivia there is over $500 million dollars in cans, under mattresses, everywhere," says Bazoberry. "Imagine if you could move that mass into the financial system with responsible institutions that are placing the savers' money in good projects."

Guatemala's Banrural has experimented with the technology in one of its branches and is now committed to a three-year plan to issue smart cards to its clients and install the fingerprint readers and cash machines in all its branches. Microsoft has also picked up on the quality of the software design carried out by Innova.

In a small store on the corner of Batallas' dusty plaza, meanwhile, proprietor Octavio Quispe Chambi is looking forward to living on the cutting edge--even if his motives are more prosaic. "I have heard about this smart card and it seems like a good system," says Quispe. "It would mean I don't have to carry my money with me when I go to the city to get supplies for my store."