Good things in small packages.

Pocket-intelligence devices are more than mere playthings. They're powerful tools for enhancing your company's strategic and organizational capabilities.

At 8:30 a.m., an American businessman gets into a taxi and is on his way to Washington National Airport to fly to New York for a major business presentation. On the way to the airport he reviews key business data on his pocket digital assistant, or PDA, and discovers that two key graphs need revisions and should be included in the client's material. Also, one important data sheet is missing from his presentation material. A quick call to the office on his pocket cellular phone alerts his team to the needed changes and missing material.

At the airport he receives a call from the office on his cellular phone, which has a virtual display that portrays information much like a full-size computer screen. He reviews the new graphs and data sheet and asks his staff to electronically mail the final copies to him at New York's LaGuardia Airport's electronic business center. He continues on to the boarding area and inserts his smart card into a smart-card reader at the gate, which instantly verifies his identity with a picture for the gate attendant on a small discreet screen. The ticket information and seat assignment are downloaded into the airline's host computer and he boards the aircraft.

On arrival at LaGuardia, he goes to the airport's electronic business center and inserts his smart card, which is encrypted for secure E-mail pickup. The data is downloaded into the smart card. The businessman inserts the smart card into the center's multicolor copier, where a push of the button downloads the smart-card information. In a few minutes the copier prints the revised presentation material. He places the smart card back in his shirt pocket and calls a taxi to take him to his business meeting, confident that he is fully prepared for an outstanding presentation. On the way, he calls the office on his pocket cellular phone to thank his team for a job well-done....

Tomorrow's portable technologies are here today. And the market for pocket intelligence is ready. Pocket-intelligence products will be to the 1990s what personal computers were to the 1980s. The emergence of pocket intelligence will cause a major shift in technologies, applications, infrastructure and users' needs, both domestically and globally.

Recent advances in micro-electronics, mobile communications, human-machine interfaces and software technologies have enabled progressive businesses to build a new class of small information systems and components with powerful capabilities. The advances also allow farsighted end-users to use this new class of micro-information systems and emerging applications in planning strategic organizational improvements.

These small components, known as pocket-intelligence devices, range in size from a coin to a credit card to a hand-held computer. They perform as portable data carriers, specialized application processors, sophisticated computers, communication terminals and consumer products. The application opportunities for pocket-intelligence devices are growing rapidly in the areas of claims and eligibility, clinical data, referrals, payments, authorization and fraud prevention.

A PRODUCT SMORGASBORD

What kinds of pocket-intelligence products can you expect to see during the next few years? Here's a sample of some technologies that will change the way you do business, both personally and professionally:

* The pocket-size, virtual-display cellular phone can receive a fax, display E-mail and stock reports, and access personal computers and data base services. The visual display is built into the flip lid of the phone. The viewing area measures approximately one inch by two inches and is as clear as a full-size computer screen.

* Optical memory cards using compression techniques can now create a picture and sound of a human heartbeat for a doctor to see and hear. A hybrid optical memory and integrated-chip smart card has recently been developed that offers the best of both features.

* A personal digital assistant is a handheld computer and personal organizer that can capture and interpret handwriting and sketches drawn directly on its screen. It can communicate with modem, fax, radio pagers, infrared remote-control beams and local-area networks.

* Point-of-sale terminals can display positive digital images and show the signature of the smart-card holder to validate purchases or entry into restricted areas. For more security, the host mainframe or process server can view a digital photo image containing several thousand dots or pixel points and search for only 12 preselected points in the photo. A thief or terrorist organization could alter the photo on a smart card, but wouldn't be able to tell which points the computer is seeking. Since the points would be missing from an altered or substitute photo, the computer can detect the forgery. This is a security device akin to counterfeit currency with security markings.

* Personal computer notebooks will have cellular telephones and modems for worldwide communications. The notebook also includes a fax with hard-copy capability.

* Wristwatch pagers and beepers will be available, as well as wristwatch sensors for physiological monitoring of blood pressure, pulse rate, respiration and movement. You'll also be able to communicate to and from a wristwatch.

* Advanced ion-conducting polymers can be used as solid-polymer electrolytes in manufacturing high-energy-density, rechargeable, solid-state lithium batteries for consumer electronics.

SMART-CARD APPLICATIONS

Smart cards are one of the most interesting pocket-intelligence products, and they are revolutionizing global markets. These portable plastic cards act like bank cards with a computer inside. Smart cards include the integrated chip with eight kilobytes and optical memory with 4.1 megabytes of storage capacity.

By 1995, we'll begin to see the first smart cards in the banking industry, with applications like prepaid or stored value, followed by point-of-sale applications for retail stores. And by the end of the decade, smart-card applications will include home banking, shopping and bill payments by telephone.

France is the technology leader, with smart-card applications that include mass transit, parking, retail, restaurants, vending machines and financial services. For the past year, the Chicago Regional Transit Authority has been testing smart cards that provide identification and an electronic purse for the handicapped. The state of New Jersey will soon test a toll-gate application with smart cards.

Smart cards could also have stored value for telephone calls. For three years, Guatemala has successfully used multifunctional smart cards with credit and debit features, as well as frequent-shopper bonuses. The card is used for retail-store, restaurant, fast-food and gasoline purchases, in addition to travel and banking services.

The Air Force is testing optical-memory cards at Wilford Hall Medical Center. Medical and dental records and X-ray images can be stored on the card and carried by Air Force personnel in their wallets.

Another major government application is the cargo manifest program, which aims to streamline the shipping of medical supplies by combining the shipments for the Army, Navy and Air Force through a central shipping point. All shipments to the 58 participating hospitals will include a complete shipping manifest stored on the optical-memory card.

Businesses also can take advantage of smart cards to help them extend and enhance their services. Currently, the plastic cards all too often act only as identification. The opportunity to combine smart-card technology with standard credit-card services is one logical application that provides both debit and credit features, plus the capacity to carry consumer data.

THE FRAUD FIGHTER

Pocket intelligence holds great potential to combat fraud. As smart cards carry more personal history, such as driver's-license, banking and health-care information, files will be encrypted so that only specific groups or individuals can access particular pieces of information. For example, law enforcement would be able to obtain only driver's-license information, not banking, or a store could access only the banking credit/debit file of the card for consumer purchases. The smart-card holder could also restrict access within certain files he or she deems sensitive.

These technologies can help financial-services industries, which lose millions of dollars annually to check and credit-card fraud. Americans wrote more than 50 billion checks last year, totaling $6 trillion and in a few years, credit-card transactions will total over $1 trillion annually. But credit-card and check fraud sap more than $6 billion from financial-services industries worldwide.

Until now, these industries haven't been able to effectively combat the unauthorized use of credit cards and stolen checks. But new technology, such as point-of-sale terminals using photo-imaging technology, can virtually eliminate the unauthorized use of credit cards and checks.

The health-care industry also hopes to use pocket intelligence as a fraud-buster. Health-maintenance organizations have suffered losses because members loaned friends their HMO cards, and the HMO had no real way of proofing them. And health-care fraud isn't limited to the United States. Europeans and Americans with serious illnesses and no insurance coverage often fly into Canada and purchase a counterfeit identification card that allows them access to a medical treatment facility in the country. After their treatment is over, they disappear from Canada and the health-care system and return to their own countries.

Here's how a typical office visit would look with smart cards. When a patient comes into the doctor's office, the receptionist passes the person's smart card through a point-of-service terminal and retrieves the patient's image and signature. That information is logged into a mainframe computer or central processor, and the service and bill is time-stamped for the designated medical services as proof that the receptionist verified that the patient was the cardholder of record.

In France, expensive, secure parking garages are common targets for automobile thieves. Criminals drive a $1,000 junker into the garage and leave it. They select a $50,000 luxury car, hot-wire it and successfully leave the garage with the new car, because the only identification is the ticket stub. These facilities are now trying to imprint a digital image of the car on the smart card so that the cardholder leaves the garage in the same car in which he or she came.

SECURITY CONCERNS

Security is another important application. Large public events, such as a world's fair, often become targets for terrorist activity. As a result, the organizers of these events, where employees may number in the hundreds of thousands, are turning to smart cards to verify personnel and restrict access to certain areas of the event.

In the pleasure-cruise business, the Achille Lauro terrorist incident still weighs heavily on the minds of cruise-ship owners. Cruise companies see smart cards as positive identification for passengers boarding ships and as a security check during excursions at different ports throughout the voyage. The card can also be assigned a stored value of, say, $100 and used for purchases, eliminating the need for cash during the cruise.

Connecticut vocational schools are looking at smart-card applications to identify students and to prevent unauthorized people from posing as students to sell drugs or cause trouble. The cards also ensure that students entitled to full- or partial-assistance lunch programs receive those benefits, and the cards provide an audit trail.

Electronic security and countermeasures are being developed against unauthorized and illegal electronic surveillance. Criminals routinely use sound guns and look over the shoulders of people in line at the automated-teller machine to capture personal identification numbers. To thwart such crimes, PIN numbers, as well as photo or signature images, can be encrypted into smart cards, avoiding the need to key in information.

Finally, pocket-intelligence technology could prove a potent weapon in the battle against industrial espionage. The Cold War is over, but people with intelligence skills have now redirected their services from military applications to governments and businesses seeking economic advantages. In a well-publicized fiasco, the French inserted discreet microphones in the headrests of Air France planes in the first-class section and wired the rooms of Paris hotels that were popular with businesspeople.

This sensitive business data gave French businesspeople an unfair competitive advantage. Industrial nations are engaging in this type of activity worldwide. If a major corporation's contract proposal or technological breakthrough is compromised and revealed to a foreign or domestic competitor, it could cause great financial loss or havoc. Pocket technologies, such as scrambler devices on pocket cellular phones and pocket sensing devices that pick up room bugs, can help secure sensitive information.

The pocket-intelligence applications that will be available within the next 10 years will give companies the opportunity to improve their products and services in many different areas. Therefore, the challenge for business today is to quickly develop a strategy for capturing a sustainable competitive advantage by leveraging those technologies.

FORUMS FOR DEVELOPMENT

To date, smart-card technologies haven't been used much in the United States because of concerns about the risk of launching new products and services based on technologies for which no widely held standards exist. As a result, three forums have been formed recently as collaborative efforts to catalyze the widespread use of smart cards in the United States: the Smart Card Forum, Pocket Intelligence Forum and the newly formed Financial Services Technology Consortium. The forums differ somewhat in their objectives, but all three provide information on various areas of pocket intelligence and are interested in expanding its applications and in developing consistent standards. For more information, contact the organizations at the addresses the phone numbers listed below.

Smart Card Forum 3030 North Rocky Point Dr. Tampa, Fla. 33607 [phone] (Kim Warren)

Financial Services Technology Consortium [phone] (Dan Schutzer)

Pocket Intelligence Forum SRI International 333 Ravenswood Ave., BS 265 Menlo Park, Calif. 94025 [phone] (Mark Cummings)

Mr. Garner is a senior analyst with the Department of Treasury's Financial Management Service in Washington, D.C.