Smart Cards -Future Aspects

Smart Cards

FUTURE ASPECTS
By Amy Lan

The future of Smart Cards is looking bright. The many existing and potential benefits smart card has to offer both the public and the private sectors of the industry raise the interests of many large corporations such as Wachovia and Motorola. Compared to the conventional magnetic stripe cards, smart cards offer increase security, convenience, and economic advantages. Reducing fraud, reducing time to complete redundant paperwork, and having the potential to have one card to access diverse networks and applications are just some of such examples. The discussion for the future of the smart card across the global industries can be divided into public and private sectors and are discussed below.

Public Services

With the increase in the application development (due to the implementation of the smart card standards) and reducing cost in technology, plans for the card’s usage have increased. However, majority of the applications are either being piloted or implemented in Europe, but are not widely accepted in the U.S. just yet.

Health Services

Health cards with multiple functions are issued to patients in France. The card can be used to store information such as administrative, medical, biological, and pharmaceutical records. The card simplifies the administrative process and enables doctors to have access to a more complete and comprehensive healthcare information.

Education

Multifunction ID cards are issued to students at university campuses and schools. The card has the function of identifying the student and also acts as an electronic purse and can be used purchase products from stores or tickets to public transportation.

Transportation

Rechargeable contact-less cards allow ticket-less and cash-less travels. Parking and telecommunications can also be paid using the smart card. This will simplify the passenger boarding process.

Welfare

Card can be used to identify the holder using a series of personal keys and fingerprint. The card holder then uses the card to access government databases and receive the welfare payment. The security will help eliminate fraud.

Entitlement Documents

Information such as those on a driver’s license can be stored on the smart card, along with an up-to-date driving records including fines and offenses. The new system can help the government keep track of individual’s records and have a higher successful rate in collecting fines.

Telecommunication

Card can be stored with cash values and thus remove coins from public phones. This will reduce vandalism and operating costs, and increase revenue (study has shown that people using the card tend to talk longer on the phone).

According to Andy Honeywood of Central Computer and Telecommunications Agency in Norwich, England, application in the future most likely will continue to increase. However, central/federal government will probably implement the applications at a slower rate than the lower level government/public organizations. The reason being that the applications for the higher government require more security and involve greater privacy issues, thus makes the applications more difficult to develop and costly to deliver. Nonetheless, the central/federal government may reap great benefits by implementing the smart card system in the future.

Private Industry

Originally developed as a stored-value card to make small value transactions (< than $20) easier. Today, over 80% of transactions are in the form of cash. Using smart card can lower transaction cost, handling cost, and costs associated with banking system infrastructure supports. The card will bring much conveniences to the consumers by combing the functions of multiple cards into one and given the ability to make transactions on/off line and peer-to-peer. The card is currently widely used in Western Europe and Asia, and which leads to potential advancement in markets such as banking, Internet, and electronic commerce.

Banking

The limitations of the magnetic stripe and the problems with fraud and bad debt can make smart cards a better choice. It not only can store 80 times more information than the traditional card, it can also help banks to have better control over credit risks by enabling banks to customize credit lines based on individual cardholder’s risk profiles and alter the parameters dynamically as needed. Also, the financial institutes can also offer more personalized products and services to fit cardholder’s lifestyles.

Internet

The card can contain all necessary personal data for easier Web connection and personalize networking. The card, with all personal information such as user’s ID, e-mails, settings for electronic appliances, and phone numbers stored on the card itself instead of a remote device, will be able to allow network connection anywhere globally as long as there is a phone or an information kiosk. As appliances become generic tools, users will have the convenience of carrying the card alone to have a personalized networking experience.

Electronic Commerce

According to the Gartner Group, it is expected that Internet purchasing will grow to $20 billion by 2000 worldwide, with security and portability in payment transaction over the network continue to play an integral roles to the success of this marketplace. SET protocol will provide a mean to transport customer data and payments information securely over the Internet without having to be locked into using one PC. Electronic cash stored on cards will enable consumers to make micropayments (penny-payments) over the internet.

Statistics

According to Dataquest, 3.4 billion smart cards will be used worldwide by 2001. Activity growth is about 30% per year, mostly outside of the U.S. About 70% of the card were used in Western Europe, and about 10% each in South America and Asia, while North America accounts for less than 5%. However, Dataquest, another market-research firm, expects that by 2001, Europe will account for only 40% of the card shipments, Asia 25%, and Americas 20%. The Insight Research Corp expects the smart card to grow to about $2.8 billion by year 2002. Also, the smart card industry will grow steadily over the next 5 years, especially in cards and devices, harnessing the power of electronic commerce. In addition, 95% digital wireless phone services will mostly likely be using smart cards worldwide. The areas that are predicted to have the greatest potential growth in the next 3 years are Asia, Latin America, and North America.

In the States and Worldwide

Smart cards are mostly accepted in Europe and Asia, especially in the less developed countries where consumers and businesses do not trust checks and other debt instruments. Other reasons are that in those countries there may be a high incidence of inflation, fraud, crime, and other factors that draw them to implement smart card technology. In the U.S., the credit cards and ATM card are working very well that Americans are hesitant to switch to this unfamiliar technology. One of the reasons is their concern over security in having money stored on a card. However, pilot projects are being implemented to test consumer’s future acceptance. Transit authorities in San Francisco, Washington, D.C., and Finland are taking up this challenge. Canada’s Quebec Soccer Federation will try registering members at the tournaments using the smart card system, and McDonald’s restaurants will test out accepting the card as payments. Ohio and Wyoming will test this technology to make government benefit payments. Globally, smart card are currently being use for payphones, wireless telephony, Internet access, banking, healthcare, and payTV.

Problems Still Need To Be Addressed

For smart card technology to proliferate, several issues must be addressed:

The industries in both public and private sectors must agree upon a technological standard to develop interface applications for use by the consumers and the merchants. With such wide variety of applications, the interoperability of the card across various applications will be crucial factor in determining the success of the card. When a user travel from country to country, there must be a compatibility between cards, card-reading devices, and applications for the user’s card to be accepted. The hardware, application, local, and network computing standards must collaborate throughout the world for users to truly enjoy the conveniences of smart card. As a result, the International Organization for Standardization (ISO) has been formed to set the standards across multiple industries for smart card.

The challenge of allowing smart card technology to co-exist with the currently-established magnetic stripe technology must be dealt with. One way of solving this problem is to develop a so-called hybrid cards where a card may have both the embedded microprocessor chip and a magnetic stripe and bar coding. This will enable the card to access different hardware systems.

The issues regarding privacy and the free exchange of information across borders also put a limit on the growth of e-commerce. Once again, users need to feel as much security in using the smart card in one region/country as in another.

The lack of vision or awareness for the long-term benefits of smart card on the consumer’s side work against the adoption of the technology. Due to the advanced banking and financial systems, and the efficient communications networks in the U.S., consumers often see the new technology as a duplication of efforts. Without the consumers backing this potential market, the card cannot be successful.

The future of the smart cards continue to shine despite of these challenges. The card, giving the merchants capability to assimilate products, customized service and pricing, payment, and marketing based on real user behaviors in real time, will become a powerful and indispensable tools to be used in the marketplace. The world should not ignore its potential to impact all sectors of the world.