USPS tests smart cards

The U.S. Postal Service is participating in its first test to help evaluate whether the agency in the future should accept smart cards from customers to pay for services offered by post offices nationwide. During the pilot expected to last until April customers patronizing four post offices in New York City's Upper West Side will be able to use a smart card to buy stamps pay for postage or conduct other retail services. Smart cards store money in digital form on computer chips embedded in the card.

USPS said smart cards should make it easier for customers to do business with post offices because they are safer than cash faster and less expensive to process and easier to use than checks. USPS hopes the pilot provides valuable information on how well customers like the idea.

"We want to better understand customer preferences and needs when it comes to these cash alternatives " said Terry Carter postal service assistant treasurer for payment technologies at USPS. "We also want to learn what it does for us as a merchant."

Last year USPS awarded a contract to IBM Corp. and NCR Corp. to install state-of-the-art retail terminals in post offices under a program called Point of Service (POS) One. The technology USPS chose for POS One will support all payment systems including smart cards debit cards and credit cards Carter said. "We want to be prepared as a merchant if the demand from customers is there to use smart cards " Carter said. "We did the same thing when we rolled out credit and debit cards " which USPS now accepts.

A decision has not yet been made about whether the agency will support smart cards beyond the pilot test. The current USPS credit and debit card infrastructure which uses a dual-purpose card reader from VeriFone Inc. also accepts smart cards. Two smart cards will be issued during the pilot: Citibank/Visa Cash cards which store up to $500 and the Chase Manhattan Bank/Mondex cards which store up to $200.

These companies are also the sponsors of the pilot. Francie Mendelsohn president of Summit Research Associates Inc. said the USPS pilot should be successful. "Smart cards are particularly useful for small purchases which is what you typically do in a post office " she said. "It would make a lot of sense for postal vending machine applications."

USPS is one of only a few agencies testing smart cards for storing money said Mike Noll federal program coordinator for the General Services Administration smart card team.

The Marine Corps and the Department of Veterans Affairs are two other agencies testing the application he said. "Overall the government direction in smart cards to date has been of an administrative nature - for example personnel processing security access and medical applications " Noll said. "Those types of applications are quicker to get in place than a cash or debit application because of the need for an infrastructure."

In general the use of smart cards in the government is increasing. But Noll said the government needs to develop a standard for the technology if smart cards are to become widely used. GSA has developed a draft set of guidelines - set for release early next year - that identifies a standard application programming interface and chip operating system so that cards will interoperate.