FEATURE - Smart Cards - Chips with everything

Smart cards combine better customer knowledge with more efficientre being used and how they will affect our lives. business processes, said Stephen Taylor, a director of Loyalty Management International, at the recent Smart Card 98 conference.

"Smart cards allow you to identify yourself and carry data about yourself, positively, electronically and securely," added Steve Turner, technical strategy manager at Retail Logic.

Powerful potential

French journalist Roland Moreno invented smart cards in 1974 to eliminate the large number of low-value cheques and to reduce fraud. Computer company Groupe Bull then developed his concept into a technology.

A smart card is a credit card-sized piece of plastic that contains a tiny computer processor. It is also referred to as an 'integrated circuit card' or 'chip card'. The processor provides intelligence, security and data storage, but the card has to be inserted into a slot in a terminal device to provide power, data entry and display through a metal terminal on the surface. The cards cost between #2 and #6 to make.

The exception are 'contactless' smart cards that rely on radio beams to provide the energy for processing and to connect them to the external device. These are used in transportation applications, where fares can be paid rapidly by passing it close to the terminal or even by walking past a reader.

It is the firewall, encryption and other security features of the processor that makes the smart card suitable for carrying data. The information stored can be security identification, medical records, a prepayment, electronic cash, transactions, personal preferences, even loyalty points.

Smarts cards are often confused with magnetic stripe or memory cards.

The former carry a limited amount of data without security and are read by 'swiping' them through a reader. Memory cards contain only a memory chip to store information, but have no processing capability and therefore no security. They are used as telephone cards and to store balances in loyalty schemes.

Smart cards are used extensively in the transportation industry for payments and ticketing, in retail for customer loyalty and in a range of areas for access control, including buildings and computer networks.

They are also found in mobile telephones and satellite television decoders.

Europe dominates the industry and, according to analysts Dataquest, accounted for 90 per cent of cards issued in 1995. Dataquest predicts growth from 84 million cards in 1995 to 1.2 billion by 2001.

The Smart Card 1998 report lists 52 national and 31 local government schemes around the world. These cover areas such as driving licences, road tolls, benefits, health records, car registration, parking schemes, leisure and town cards.

Financial uses

The important immediate uses in the finance industry are for debit and credit card payments, electronic cash, electronic commerce and home banking.

"We started with embossed cards, then magnetic stripe cards added more security and personalisation," said Jon Prideaux, senior vice president, emerging markets, at Visa International. "Magnetic stripes have reached a dead end, unable to add more services to keep the customer interested, so smart cards will provide local computing power to give greater security and more functional opportunities."

The problem is that banks have never been able to justify the additional cost of smart cards and their terminals. Other payment services are needed to increase their functionality and profitability, such as electronic cash and secure e-commerce.

Over 50 million smart cards are already in use as payment cards, mainly in France and Spain, although they still have their embossing and magnetic stripes. Committing fraud with smart cards is extremely difficult because of the in-built security and because they are too capital-intensive to manufacture and manipulate.

According to the Association for Payment Clearing Services (APACS), which is running pilot projects for debit and credit cards, while plastic cards still only account for less than 10 per cent of all transactions, cash is still used for 75 per cent. The high cost to banks, retailers and customers of handling cash, means there is a major saving to be made by replacing notes and coins with electronic cash.

Mondex electronic cash has been on trial in Swindon - 35 per cent of the 40,000 NatWest and Midland customers are using it at 650 outlets, including shops, buses, taxis and car parks. Mondex is expected to announce plans for national roll-out imminently.

It is also being used by 66,000 students and staff at Aston, Exeter, Nottingham, Sheffield Hallam and York universities for electronic cash, physical access control, student union membership, library cards, etc.

Mondex has been extended throughout Hong Kong following a succesful trial and there is another pilot in Guelph, Canada.

Microsoft is building support for smart cards and smart card external device readers into Windows and its software development tools. The Personal Computer/ Smart Card (PC/SC) Workgroup consists of Groupe Bull, Hewlett-Packard, IBM, Microsoft, Siemens-Nixdorf, Sun Microsystems and Toshiba and smart card manufacturers Gemplus and Schlumberger.

Java Card now allows Java to run on smart cards, bringing a new range of existing applications to the smart card industry. The adoption of open standards will enable the loading of applications onto an existing card and the security will keep the data in one application safe from another.

If cheap network computers (NCs) are installed in hotel rooms, business centres and so on, travelling business people will be able to dispense with notebook computers. Instead, they will insert a smart card into any NC and get access across the internet to information and services from their own office.

Smart cards will also allow people to use the secure electronic transaction (SET) standard for secure e-commerce from any computer. It will also bring electronic cash to the internet for making small value payments, and provide identification through digital certificates for electronic banking from any convenient device.

Smart travel

Smart cards have long been used to replace tickets for public transport, using pre-payment schemes. Smart cards will replace ticketing systems on all London Underground and bus services from 2001.

"The future of transport involves road pricing, more extensive and expensive parking controls and more attractive transport," explained Nick Lester, chief executive of the Transport Committee for London. "Smart cards are involved in making all of those possible."

Contact smart cards have long been covered by ISO 7816 - ISO 10536 will cover proximity cards and ISO 14443 will cover vacinity cards. Europay, MasterCard and Visa have agreed the EMV standard for bank cards and terminals for debit, credit and electronic cash.

However, there are no standards for terminals themselves. One of the problems is that the flexibility of the card allows such a wide range of functions that the standards have to cover a complex situation. For instance, in the New York cash trail, although either VisaCash or Mondex will work with the same terminal, they require different procedures for the same task and the same key on the till performs different tasks with each card.

In Europe, the arrival of the single currency will provide a major impetus to create international standards, and the need to change terminals to accept new coins will be an opportunity to incorporate smart card terminals.

There is also an EC initiative to develop a 'Eurocard' for passports and electronic Euro currency.

Clearly, users don't want a pocketful of smart cards so the eventual goal is to allow users to load whatever applications they want onto a card.

The security on the card allows it to carry identification information that can be verified by the external device. This allows the cardholder to be authenticated locally, without waiting for connection to a database, as with magnetic stripe cards.

Like it or not

You don't need to buy a smart card because you will be given one when you need the service it offers. The parties involved in designing schemes are working hard to make them attractive. Let us all hope they succeed, as it looks as though we will get smart cards whether we want them or not!

FURTHER INFORMATION

- The Smart Card Club has over 100 members from both supplier and user organisations that participate in industry forms.

Tel: (01223) 329900, fax: (01223) 358222, info@smartex.co.uk.

- The Smart Card 98 is a research report that explains the smart card industry. It is available from SJB Services.

Tel: (01458) 253344, fax: (01458) 253 253366, e-mail: sclark@sjb.co.uk, http://www.sjb.co.uk.

- The Smart Card Forum at http://www. smartcrd.com has a mission to promote multi-function smart cards.

- The Smart Card 99 conference and exhibition will be at Olympia on 23-25 February 1999. Tel: (01895) 454545, fax (01895) 454647, e-mail: 100730@compuserve.com.