|
Links Related |
What's So SMART about Smart Cards?
White paper reviewed by Eric Thomson Research Report: What's So SMART about Smart Cards? Author: Smart Card Forum Date: 2001 Size: 12 Pages Relevance Rating: Medium-High Web Address: www.gemplus.com/basics/download/smartcardforum.pdf
Executive Summary Smart cards are like the checkless society, the recurring "next sure thing." This white paper by the Smart Card Forum provides a foundation for understanding the potential for this product - if not the compelling business proposition that has been missing in the United States for the past decade while these cards became a prevailing method of payment in Europe and parts of Asia.
In addition to summarizing the content of this research report, I will supply evidence that suggests widespread issuance of these intelligent cards may soon result in one finding its way into your wallet. It's a result driven by a combination of fear and greed - the right ingredients necessary to fuel change in the payment arena.
What is a smart card? It's a plastic card the size of a credit card with a microprocessor or memory chip embedded in it coupled with an intelligent reader. Memory chips cost much less and are typically used for low-risk/small-value storage. True smart cards contain a microprocessor to protect decryption keys, which render them safe enough for high-risk/high-value applications. These chips are designed in a manner that the slightest attempt to alter their content renders them useless.
This marriage between a convenient plastic card and a microprocessor allows an immense amount of information to be stored, accessed and processed either online or offline. Smart cards can store several hundred times more data than a conventional card with a magnetic stripe.
The information or application stored in the IC chip is transferred through an electronic module that interconnects with a terminal or a card reader. This dimension of processing power, storage, security, programmability, the Internet and emerging wireless standards lay the foundation for a platform that is sure to alter the landscape of traditional POS.
It is estimated that there are more than two billion smart cards in circulation today, with fewer than 2% here in the U.S. The following chart represents the distribution of these cards by function:
Phone Cards 52% Stored Value Digital Cellular Telephone Cards (GSM) 12% Security/ID Banking-Investment, Business, Consumer 10% Funds Transfer/Security Loyalty 5% Retention/Reward Access control 5% Security/ID Health care 4% ID/Medical History Gaming 2% ID/Security Other (Ticketing, Military, etc.) 10% Various
This white paper does a good job of explaining, in layman terms, the various technology components available to card issuers. It used to be that these cards were good for only a single function, such as stored value or access control.
Today, the increased processing power and storage capacity that can be compressed into one of these tiny chips have opened the door to the multi-application smart card. This combination of plastic and silicon provides cellular phone activation, biometric identification, portable data storage for medical records, public transit, e-mail and computer/Internet security on top of EBT/eCash.
Individually, these applications are being deployed on campuses, in hospitals, at airports and subway stations, in government agencies and on keyboards of new PCs and in PDAs. As these applications gain momentum and familiarity by greater numbers of consumers, the growing fear in the minds of corporate strategists is the prospect that a competitor finds a way to bundle a multi-processing application that eliminates the need for their card. Should that happen and you want to want to serve that household, you have to pay a toll-click charge each time they interact with you via that strip of plastic.
Most recently, the firms making multimillion smart card deployments are all doing it with hybrid devices containing both magnetic stripes and integrated chips. The American Express Blue Card and the CitiBank SmartPay card issued to federal government employees are examples of this card design.
Wireless standards are about to change all this, and it now looks as if a third method of communication will be found on the next wave of chip cards. It is widely rumored that Bank of America has decided to replace its installed base of more than 10 million card holders with radio-frequency (RFID) cards.
These contactless cards derive their power from an RF field generated by the card reader. The RF field also transfers information between the card and card reader. A contactless smart card has an antenna coil that communicates with a receiving antenna to transfer information. Employee ID badges issued by government and large corporations for restricted building access are typical contactless smart cards. These cards operate on the same principals used by automatic garage door openers.
To understand why contactless cards are likely to prevail, you only have to look at how pervasive digital phones have become. Every PC that rolls off an assembly line today has wireless capability built into it - not to mention all of the new handheld PDAs. You'll be able to combine the security features available on these cards with the prospect of being able to wave the card past your laptop, enter a PIN and automatically download your e-mail or link into your home page without the annoying inconvenience of having to enter multiple user IDs and passwords.
When you look at what major retailers and the two bankcard associations are planning for their smart cards, the killer app is the loyalty program, which enables these smart cards to store, process and deliver the electronic equivalent of incentives such as reward points, coupons, gift certificates and cash back.
The ability to track and reward high volume/value customers across multiple product lines is the focus of these marketing programs. Card issuers finally have gotten the message that competing on the basis of interest rates or fees is a failed strategy compared to recognizing and rewarding your best customers.
When Target Stores announced late last year that it would be upgrading all of its check-out lanes to accept smart cards, its financial partner, E*TRADE, immediately installed smart card readers in its ATMs just inside the front doors of each Target location. This decision effectively raised the bar for the "large box" retailer, making it inevitable that Kmart, Wal-Mart and Costco soon will be making the upgrade.
Visa and MasterCard appear to have chosen their software partners to go to market to execute their respective loyalty programs.
Visa has selected a transplanted Australian firm, Catuity (www.catuity.com ). If you visit its Web site, you will learn a new vocabulary, one that refers to "data bubbles" that interact in real time with a "program engine" that might be found on a mobile phone, Palm or handheld PC, smart card or other consumer device.
MasterCard has partnered with the French firm Welcome Real-time (www.welcome-rt.com). If you visit its site, you will find, in both French and English, phrases like, "Money is about to become intelligent," and, "Smart card software that recognizes and rewards high-value customers, in real-time, at point-of-sale." Highlights of White Paper Findings
"A microprocessor card can add, delete and manipulate information in its memory on the card."
"? The information age has introduced an array of security and privacy issues that have called for advanced smart card security applications."
"The Global System for Mobile communications (GSM) standard for mobile phones uses smart card technology. The card is inserted into the mobile handset, stores personal subscriber information and preferences that can be PIN code-protected and transported from phone to phone. The smart cards enable secure subscriber authentication; roaming across networks; and secure, mobile, value-added services."
"The smart card's portability and ability to be updated make it a technology well suited for connecting the virtual and physical worlds."
"A March 2000 study by Dataquest predicts almost 28 million smart card shipments in the U.S. for 2000."
"The average price for all microprocessor cards is $3.79 each; the average price for a memory card is estimated at 47 cents."
Web Sites for More Information on Smart Cards
> www.scia.org (Smart Card Industry Association)
> www.howstuffworks.com/question332.htm (How Stuff Works Defines Smart Cards)
> www.smartcities.co.uk/links.htm (UK Site for Smart Cards)
|
|
Copyright 2002 The Green Sheet, Inc. |