his year's Smart Card Alliance Fall Annual Conference, held Oct. 18 - 20, 2004, focused squarely on issues surrounding identity management solutions. Even though smart card technology faces challenges in consumer trust, acceptance and in widespread adoption, according to experts, the case for payments applications in smart chips and contactless technologies is strong and will continue to grow.

Security in a world full of terrorist activity and the need to protect personal and corporate financial information are two important applications that smart chip, biometric and contactless technologies suit very well. Certainly there are many fascinating ways government agencies and enterprise are implementing smart cards. Moving beyond passwords for more securely-accessed systems, more stringent identification methods, e-passports, the health care field (including pharmaceuticals) and authentication for subscribers and in e-commerce are some of those.

But offered almost as a side note during presentations and panel discussions was information on ways smart cards are integrated into payment transactions. Even though a few successful programs in petroleum and transit were highlighted, the role of payment processing in various smart chip applications was not mentioned.

For example, there are 23,000 parking meters in San Francisco, where the Conference took place, equipped to accept payment using smart cards. The San Francisco Area Translink Project, a Conference participant, will provide access to many transit systems and let riders throughout the nine-county Bay Area board busses, trains, trolley cars and ferries using one card. No one mentioned the behind-the-scenes activities, including settling the transactions, necessary to make this possible.

Smart card technology is growing in acceptance and use in many enterprise arenas, however. Approximately 200 people from across the spectrum of smart technology producers and users attended the conference, participating in three days of presentations, panel discussions, private meetings and networking.

Speakers representing government agencies, global corporations, software makers, equipment providers, transportation systems and cooperative initiatives touted the many solutions to real world problems smart cards can solve. As proof, Paul Beverly, President, Axalto, Americas, cited the 100 million smart cards the company issued in 2004, including 62 million SIM cards now used in cell phones in the United States (out of 1 billion worldwide).

Keynote speaker Richard Clarke drew on his perspective as a former Special Advisor on security issues to four U.S. presidents for his speech on the real need for smart cards. Clarke presented one of the most compelling arguments for broad implementation of smart card technology, including for access to buildings, computer networks, truly authentic identification and to protect personal financial information in banking and payment transactions.

The problem lies in convincing the public that smart cards are a good thing, and are very necessary in today's world. Among customers surveyed who use online banking, he said 30% - 35% are happy with the password protection methods offered by their banks. But considering the actual number of customers who use online banking services is low, as well as the considerable cost savings per transaction online banking creates for banks (they're reduced from $7 to less than $0.07), it behooves the financial services industry to convince people that these are not Big Brother tactics.

Education and public awareness toward establishing acceptance and trust in the technology are the industry's biggest challenges, Clarke said. Smart technology providers must persuade Americans that security based on passwords or digital watermarks (they're on most new drivers licenses, but are not ever used) offer only a "false sense of security," and are "an enormously silly waste of time," according to Clarke.

Smart Card Alliance Chairman Kevin Gillick acknowledged that in order to expedite acceptance of the technology, there must be better, more cooperative efforts made between and across industries. The Alliance is focused on attracting new members by establishing member-driven initiatives and partnerships in specific segments to accelerate adoption of smart cards, he said in his opening remarks.

However, as part of the "State of the Markets" Executives Panel, Jim McCarthy, Visa U.S.A.'s Senior Vice President of Emerging Technologies, argued that from the card Association's point of view, there is a lack of compelling applications, no demand for new features and no business case for smart cards in payments. Visa has invested heavily in creating a secure infrastructure; there is already a low incidence of fraud within it. Problems also arise with challenges to acceptance by end users and merchants, he said.

A few speakers said that contactless technologies including RFID could be the key to increasing adoption in the payment processing market. In one presentation on authentication, credit card and ATMs were referenced as possible models on which to base an overall combined, or "federated" approach to identification management.

In one current example of a successful program, Shell Canada has implemented an RFID contactless pay-at-the-pump system incorporating key fob tags. Michael Cooper, Shell Canada's Operations Leader for POS Systems, was part of a panel that addressed various aspects of emerging contactless solutions. The company's system was initially designed to speed up transaction times for fill-ups and to increase thru-put during the busiest periods of the day.

Cooper said, however, that along with quick payments, Shell Canada customers are connecting their contactless tags to loyalty programs offered by their credit card issuers to earn reward points. As an example, he said that he and his wife have several tags each that they link and unlink to different loyalty programs, depending on the rewards offered. He did not address or name the companies or processes involved in integrating the various programs and transaction settling.