With both MasterCard and Visa testing smart card technology, miniature computer chips and radio antennaes are set to take over from the tell-tale magnetic strips which have so long been core to card-based transactions.

However, smart card technology vendor Keycorp believes it will be some time before the technology gains a foot hold in the Australian market, due in part to the wide use of EFTPOS terminals.

Keycorp key account manager Andrew Parker pointed out that smart card technology had experienced significant success in countries where other card based transactions were still in their infancy.

According to Parker, smart cards are unlikely to make significant inroads into the Australian market until at least 2003.

Nonetheless the Asia Pacific region offers more promise, with Visa announcing its intention to install smart card technology in the South Korean market in September this year. Similarly, MasterCard is conducting limited trials of its own smart card system in the US, and hopes to roll out the technology by June 2003.

The system, called MasterCard PayPass, allows consumers with specially equipped credit cards to simply tap or wave their cards against a reader to make a payment, rather than having to swipe the card. If the value of the purchase is under a certain amount, the cardholder needn't sign a receipt.

The PayPass system operates over MasterCard's existing transaction network, so the company didn't need to make major infrastructure investments to get the system running. Merchants, however, will need to buy new reader equipment, costing less than US$200 per unit.

Visa on the other hand has announced plans to use smart cards specially fitted with radio-frequency chips (sometimes called RF identification, or RFID, tags) that will allow people to conduct small transactions, such as paying a train fare or buying a soft drink, without having to fish for change or swipe a credit card.

Visa, which will install the first such system in South Korea, says wireless smart cards have the potential to make life easier for a range of users, such as commuters, who could use a card to pay their fare at subway turnstile instead of standing in line to buy a token.

People would hold the card--or phone or other device containing a card--within about 10 centimetres of a terminal, which would use wireless transmissions to send payment information.

The new smart cards will use wireless chips that conform to an international wireless standard known as ISO 14443. Companies can work with Visa to add similar capabilities to their handheld devices, such as cell phones, Visa said.

Merchants meanwhile will still be expected to cough up at least US$100 per terminal - and there is no indication at this stage that such systems will be compatible with each other.

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