Killer Cards.

Smart cards, with their ability to hold hundreds of pages of data, are a hit in Europe. A Rancho Dominguez company is building up its operations, betting that Americans, at last, are getting the hint

For much of the last decade, smart cards have been hyped as the next big thing in e-commerce. Except it never happened in the United States. Less than 4 percent of the 1.8 billion smart cards used worldwide last year were in the hands of Americans -- and those were used primarily by government agencies, universities and corporations that have special security needs.

Now there are signs that the idea is finally breaking through -- encouraging news for Oberthur Card Systems of France, whose U.S. headquarters in Rancho Dominguez has been sprucing up its smart card plant. Inside the high-security, prison-like building, workers in the company's just-completed $5 million clean room make smart cards for everyone from MasterCard International to makers of TV set-top boxes to telecoms.

"We have never before seen as many deployments of smart cards in the U.S.," boasts Philippe Tartavull, president and chief executive of Oberthur's U.S. operations.

Smart cards are indeed smart. A card with a microchip can handle 64 kilobytes, or about 500 pages of data. Unlike traditional magnetic stripe ATM or credit cards, smart cards can process information, change data stored on the card and run a wide range of applications, including more secure forms of e-commerce transactions.

Europeans use the card to pay for just about everything from parking meters to Big Macs. In Germany, nearly every citizen has a health insurance smart card that holds insurance information and other health data.

Not surprisingly, the biggest market in the United States is for bank smart cards, which have been getting a push from Mastercard, Visa International and American Express Co. -- all Oberthur customers.

In the first major sign of retailer support, Target Corp. recently announced that it will work with Visa to issue millions of the cards and will install smart card readers in all of its nearly 1,000 stores. Visa also has been instrumental in winning support for smart cards from banks like First U.S.A., FleetBoston Financial and Providian Financial.

Not to be left out, MasterCard is ramping up its efforts in the United States. As of March 31, there were 39 million MasterCard card smart cards worldwide, and Chris Rieck, vice president of e-business services for MasterCard, says he would not be surprised if that number triples within the next two years (though he wouldn't say how many of those would be in the United States).

American Express has already introduced its own smart card -- the Blue card -- with a $45 million marketing campaign. Hipster ads, targeted at a young, well-educated, tech-savvy consumer, continue to be seen on television and in print. The marketing push has even extended to sports clubs, subway cars, restaurant menus and rock concerts.

Analysts estimate that 7 million Blue cards have been issued so far. But it's not clear if Blue's success has more to do with the card's enticing financial terms or with its smart technology.

Lack of demand

That's the dilemma facing Oberthur and a handful of other companies pushing smart cards in the United States. "What we don't have yet is a compelling business case to use them, because credit cards are so prevalent," explains Christina Kasica, an analyst with Ovum, a Massachusetts-based research firm.

Oberthur's vice president of corporate marketing, Francine Dubois, compares the American Express Blue card to a PC running only word processing software. "The Blue card is just waiting for other applications," Dubois says.

Up until now, it's been an expensive proposition. Financial institutions and merchants would have to install special smart card readers, a hefty cost. The cards themselves can cost issuers as much as $6 each, compared with traditional cards that often run less than a buck.

But costs for the chips and readers are falling. That, coupled with a rise in consumer concern about Internet fraud, has made smart cards all the more attractive to financial institutions and credit card companies.

Says Visa Chief Operating Officer Paul Vessey: "Target's adoption of smart cards signals momentum and mainstream acceptance for this new payment technology in the U.S."