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Button-Down Solution

The wild card in the electronic-payment competition against smart cards comes in a smaller package. The iButton-a 16-millimeter diameter steel canister containing a microchip-has advantages over both technologies. The iButtons, made by Dallas Semiconductor, are activated when they are placed in contact with a receptor pad on, say, a vending machine. As soon as it touches the pad, the iButton transmits data directly to the chip inside the receptor. The device can be made into a ring, worn on a necklace, or built into a wide array of garments, says Dallas Semiconductor vice president Michael Bolan, iButton’s coinventor.

Unlike a Speedpass, which stores nothing but the user’s identification code, an iButton can hold electronic cash, coupons, and other data. In that sense, it does resemble a smart card, but Dallas Semiconductor claims that the steel button is more rugged than the plastic card. And cheaper, too: Bolan says that his company supplies the devices for less than $1 each in large quantities. By contrast, SchlumbergerSema’s Pattinson confirms that smart cards typically cost at least $4 each.

In addition, because the iButton isn’t a major-brand credit card, there are no transaction fees, which range from two to six percent of every MasterCard, Visa, or American Express payment. The iButton’s chief drawback is that, unlike other payment technologies, it adheres to no recognized standard: it stores and communicates data in a proprietary format.

In iButton’s most extensive installation so far, it serves as a subway pass in Istanbul, Turkey. Riders entering the station simply touch their buttons to a reader, which deducts the payment from electronic cash stored on the button. Five million people now use the so-called Istanbul Purse, which is also gaining acceptance as a form of payment among the city’s merchants.

All told, according to Dallas Semiconductor, there are more than 65 million iButtons in use worldwide. That includes large installations in parking meters in Brazil and Argentina, gas stations in Moscow and Mexico City, bus terminals in China, hospitals in Switzerland, apartment buildings in Korea, and vending machines in Canada.

One application should drive that number even higher. Dean Kamen, inventor of the self-balancing Segway electric scooter, which is expected to hit the market in 2003, has selected the iButton as the Segway’s all-purpose starter key and security device. To activate the vehicle, the user touches the steel canister, mounted on a key-size piece of plastic, against small metal contacts on the handlebar. The Segway owner can program the chip with a variety of access features, including top speed and steering sensitivity. Companies with Segway fleets can use that ability to control their users’ driving behavior.

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