 Smartcards
Smartcards will soon become omnipresent in
our every day life. This article gives an overview of the field and considers:
what the business case is for using them and: what are the main issues to be
addressed in considering their use.
Chip or smartcards were
developed in the 70s and commercially introduced in the early 90s. Since then,
their importance has grown across many different sectors. Currently, the most
common applications for the smartcard chips are SIM chips in mobile phones,
followed by improved credit and debit cards issued by financial institutions.
These areas are just two of the many applications smartcards can be used for.
This article gives an overview of smartcards and what can be done with them.
Types
of Smart Cards
Smartcards can hold
a wide variety of data types including security access information, applications,
and records. There are two different card types: memory cards and microprocessor
cards.
Memory cards can be split
into three types:
- Straight memory cards:
these cards provide pure data storage. The data access is not protected by
any identification process and no data processing is possible.
- Protected/Segmented Memory
Cards: these cards provide data storage, which can be partly or fully protected.
The memory array can be segmented to be used for different applications with
access to specific segments only for authorized parties.
- Stored Value Memory
Cards: these cards are specific purpose cards used for storing a value and
have little or no memory beyond the simple value information. These cards
can either be disposable or rechargeable and can incorporate security measures,
such as password protection.
Microprocessor cards incorporate
a computer chip allowing for on-card dynamic data processing. The chip runs
a Card Operating System (COS), which manages the memory allocation and the file
access and organisation. The memory of the card is split into independent sections
used for specific functions or applications. Microprocessor cards allow multi-functionality
and applications can be added on, changed and updated throughout the lifetime
of the card.
There are two primary types
of chip card interfaces: contact and contactless. Cards may offer both contact
and contactless interfaces by using two separate chips (sometimes called hybrid
cards) or by using a dual-interface chip (sometimes called “combi” cards).
Application
areas
As mentioned above,
smartcards present a variety of application areas. The following list gives
an overview of the most typical areas.
- Banking/payment: The
major card association’s (Europay, MasterCard and Visa) Credit/Debit Cards
have adopted smartcard specification for payment application. These specifications
- EMV (Europay, MasterCard, Visa) - define the physical characteristics (size,
shape, thickness, position of contacts), the electrical characteristics (signals
to be fed to each contact), command set (how to access data and functions
on the card), overall card security methodologies (static data authentication,
dynamic data authentication) and the data to be stored on cards for payment
systems.
- Loyalty and Promotions:
Smartcards can hold information about loyalty programmes, such as the customer
identification, point balances and purchasing behaviour information. Additionally
it is possible to integrate different loyalty programmes on the same card.
- Access Control: Smartcards
can provide features for logical and physical access to systems and locations.
These provide a large amount of added features, such as authenticate individuals,
authorize access, assign access privileges, track or audit accesses, manage
visitor control, generate access reports.
- Stored Value: A stored
value smartcard contains all the information necessary to identify the card
and its value, making it unnecessary for the merchant to contact a bank or
other database to authorize the transaction. Depending on the type of card,
a PIN number may or may not be required. The card can either be used until
the value is exhausted, and then is disposed of or can be reloaded either
by link to a bank account (e.g. online, ATM machines) or reload machines.
- Identification: The
smartcard can be used as an identity card, allowing a number of security features
to authenticate the identity of the cardholder, such as printed identification
on the card, digitised photo and digitised written signature on the card,
and cardholder information and data (e.g., digitised photo, name) stored on
the chip. The smartcard can also be used to maintain a biometric template,
which can be used to authenticate the identity of the cardholder by matching
a live scan of a biometric feature (such as a fingerprint or iris scan) to
the template on the card. Thus, the card can provide highly secure and portable
authentication of the cardholder’s identity.
- Ticketing, Parking and
Toll Collection: Traffic management and fare collection systems often impose
heavy operating costs in public transit systems and toll highways. Prepaid
cards have proven to be very effective and popular in saving time and resources
in managing traffic and passenger flows and improving services. Contactless
smartcards send data via radio frequency waves eliminating long lines. The
amount of information on smartcards also allows new types of services which
are customized for specific groups of users, and the user data can be collected
and analysed by a central server further improving services. Such ticketing
systems can also be used in sports arenas, concert halls, amusement parks
and other venues processing admissions.
Looking at all these areas,
we can imagine how smartcards will soon become omnipresent in our every day
life. Considering that most people already carry a number of credit and debit
cards plus several loyalty cards for different stores in their wallets, the
idea of having a number of additional cards for these applications does not
seem very appealing. Therefore the most interesting feature of the smart card
is multi-functionality. A large number of local authorities have started to
introduce smartcard schemes with many useful applications, ranging from e-purse
functionality over access to public services (libraries, leisure centres, etc.)
and loyalty schemes with retailers to public transport ticketing. But there
are also many private initiatives such as membership cards for football clubs,
which rely on smart card technology.
Conclusion
Following a research
study, Business Advantage recently advised one of our clients on the feasibility
of introducing smart cards in a variety of application areas, all of them including
some type of loyalty application. In the course of the project we identified
a number of issues, which must be considered when looking into the introduction
of smart card technology. Some of these issues include:
- The major revenue source
for a smartcard system relies on the holders using their cards in partner
shops for loyalty applications. How likely are the users to use the cards
and how can you encourage the use of them?
- There are a large number
of loyalty programmes in the market. How high is the interest of consumers
to carry another card in their wallet?
- Smartcards in a loyalty
context are used to build a customer/user profile, which then can be used
to offer customised services. Privacy and data protection are both a major
issue and users need to be convinced that the data is not being used beyond
the stated cause.
- The introduction of
smartcard infrastructure can be quite expensive. Therefore the cost benefit
calculations are very important to ensure return on investment.
- The functionality of
smartcards is very impressive but many of the functions can be fulfilled by
less expensive bar code or magnetic strip card schemes. How complex is the
application to justify the investment of a smartcard?
We believe that, in order
to make smartcard schemes based on loyalty attractive to their users, it is
very important to include a wide variety of applications. The business case
for introducing this type of smartcard scheme relies primarily on the development
of user profiles. There is not one unique answer to the issues covered above
and they have to be considered on a case by case basis through a variety of
options. Focus groups are helpful in answering some of the questions and in
understanding the expectations of the potential users. A quantitative research
study can add to that understanding and can then lead to a telemarketing campaign
to recruit possible partners for the scheme.
Business Advantage can help
you to develop the business case, supported by all the different means of Market
research.
For Further Information
on the services Business Advantage offer please call +44 (0)1689 873636 or email
info@business-advantage.com.
Business Advantage
has specialised in the provision of B2B research and business development services
in the IT and telecommunications sectors since its inception in 1992.
“Creating business advantage in an ever-changing world”
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