Two years ago, Utah investigated the use of a smart-card driver's license. The idea was to have a license that could store biographical, insurance, medical and health information about the driver on a microchip embedded in the license. But the project was quickly killed by the Legislature after consumer groups and the media voiced concerns about privacy and "Big Brother" government.

"No one has dared to touch the issue since then," said David Moon, Utah's chief information officer.

North America, especially the United States, hasn't embra-ced smart cards, the plastic cards with built-in microchips. Whether for storing money or information, use of the cards has never caught on. Around the world, however, smart-card use is growing rapidly, 30 percent annually by some estimates. From Europe to South America to Asia, smart cards are used for payphones, wireless telephony, Internet access, banking, healthcare and pay TV. Drivers' licenses with silicon chips are beginning to appear in certain countries.

In the United States, however, smart-card use has been extremely limited, mostly in pilot projects and limited applications. But the scope of smart-card business in this country could expand thanks to the rapid evolution of electronic commerce. Industry experts and government officials believe that smart cards could provide the means to overcome one of the biggest hurdles facing electronic commerce: authentication. With digital signature technology embedded in a smart card, a user could simply swipe a card through a reader to authenticate themselves and their transaction.

"Smart cards are one of the few tools for maintaining privacy and security and are more trustworthy than software on an unsecured network," said Donna K. Farmer, president of the Smart Card Forum, a 200-member organization of card manufacturers and vertical industry users of smart cards based in McLean, Va. "The cards are an enabler [for electronic commerce] because they are fast and easy to use."

Many Cards, Few Uses

Similar in size to today's plastic credit, debit and payment cards, smart cards contain an embedded silicon chip that can simply store data in memory or perform as a microprocessor. Memory cards gained popularity in Europe, where they have been used to pay for phone calls and other small cash transactions. Since then, they have been used as access-control devices and for authorizing certain banking transactions.

Some of these applications have produced significant benefits, cutting telecommunications costs and

reducing fraud for the companies that use them while providing convenience for customers. More than 676 million cards, costing from 80 cents to $15 apiece, were used worldwide in 1996, according to the consulting firm Frost and Sullivan, based in Mountain View, Calif. An estimated 3.4 billion cards will be used worldwide by 2001, according to Dataquest, a San Jose-based market research firm.

In the United States, however, barely 3 million smart cards can be found in the wallets and purses of Americans. The failure last year of a high-profile smart-card test on the Upper West Side of Manhattan has only reinforced the image here of smart cards as a solution in search of a problem. According to Farmer, using smart cards for stored value, as in Manhattan, when a well-developed infrastructure for payments involving credit and debit cards already exists never made a lot of sense.

Where smart cards are expected to catch on is in the field of security and authentication for electronic-commerce transactions. As electronic commerce becomes more sophisticated, involving everything from applications for mortgages to tax filings, users are going to require greater levels of security to ensure that their transactions are protected from tampering. More importantly, parties involved in sensitive transactions will want to be sure the other party is who he or she claims to be.

Digital signatures can provide this level of authentication and security through encryption, but it requires the use of software on the open Internet as