Smart Card Technologies
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Title: 2001: A Smart Card
Odyssey: Part 1 of 2 By Donald Davis The boom in mobile phones that use smart cards for identification guarantees that 2001 will be a big year for smart cards. But the industry could really take off if key credit card, government and transit projects register successes. Predicting the future should always be this easy. Will the smart card market grow in 2001? It is close to a sure thing, say industry executives, because of the explosive growth in demand for GSM mobile phones that carry smart cards inside each handset to identify consumers to their mobile phone operators. The seemingly insatiable demand from telcos for those subscriber identity module smart cards will be the primary reason unit demand for smart cards will surge an estimated 22% to 23% in 2001, agree analysts from market research firms Dataquest and Frost & Sullivan. Even better for vendors, because SIM cards are among the priciest of smart cards, chip card revenue will grow even faster. San Jose, Calif.-based Frost & Sullivan predicts the worldwide smart card market will generate nearly $2.8 billion in revenue this year, up 34% from $2 billion in 2000. Not surprisingly, card and chip vendors are upbeat. "We believe it's going to be a great year for sure," says Maurizio Felici, general manager of the smart card division at Swiss-French semiconductor manufacturer STMicroelectronics. But the GSM-fueled boom is only part of the story. The coming year will see important projects in such areas as financial services, government, transit and computer network security that-while not necessarily having a huge impact on volumes-will showcase a new generation of more powerful and feature-rich chip cards. If these projects fulfill their promise, they could pave the way for large-scale adoption of smart cards over the next few years. The most-cited example is the push from U.S. credit card issuers to introduce chip-based credit cards in the world's largest payment card market. Unlike such European countries as France and Britain, where banks introduced smart cards to cut fraud, the U.S. issuers see the added power offered by a computer chip as a way to woo the most desirable, technologically savvy consumers. "For the first time we'll have smart cards deployed in the financial services field for the right reason," says Remy De Tonnac, executive vice president, business development, for Gemenos, France-based smart card vendor Gemplus International SA. "I believe 2001 will be the year that we'll see how the smart card is really bringing a strong, sound, appealing value proposition to banks and their customers, which has not been the case so far." 2001 also will see groundbreaking projects in government and transit, with several projects featuring the latest in smart card technology. Here is a look at important developments in key market segments. Telecommunications: Most discussions of the smart card outlook start with the boom in GSM mobile phones. "GSM has been the driving force of the smart card industry for the past four or five years, and it definitely will be next year also," says Lutz Martiny, a Paderborn, Germany-based consultant and chairman of the Eurosmart smart card industry trade association. Industry forecasts bear out that assertion. The demand for SIM cards will grow from 317 million in 2000 to 417 million cards this year, a 31.5% jump, predicts Andrew Phillips of Dataquest, a unit of Stamford, Conn.-based GartnerGroup. He estimates SIM cards will represent nearly 53% of the demand for the sophisticated microprocessor smart cards that not only store data, as do memory cards, but also can manipulate data. That would allow, for instance, a SIM card to direct a handset to search for the nearest Italian restaurant, or to apply a digital signature to a stock transaction. With mobile operators desperately competing for market share, cost is little object, and smart card vendors can charge relatively high prices for SIM cards. Phillips estimates the average price of a SIM card at around $4.50, compared with $2.78 for banking chip cards and 40 cents for memory cards, which mostly are used at pay telephones. As a result, SIM cards are a cash cow for smart card vendors, particularly since the operators' demand for the most sophisticated services allows card vendors to bundle software development and services along with the SIM cards. "SIM cards represent 20% to 25% of the volume, but they represent close to two-thirds of the revenue of the smart card manufacturers, because typically those are high-end cards and they are sold with a lot of services," says Olivier Piou, president of the smart card unit of Schlumberger Ltd., based in Montrouge, France, and New York City. By contrast, Piou notes that prepaid phone cards represent half of the smart card volume, but less than 20% of the revenue. Dataquest's Phillips estimates there will be nearly 1.6 billion memory cards sold in 2001, up 18% from 1.3 billion memory cards in 2000. Most of the memory cards are used as prepaid cards at pay phones in such markets as China, Mexico, France, Germany and Indonesia. While SIM cards already are at the high end of the smart card pricing chart, mobile phone operators will order even more expensive cards this year to hold more applications, predicts Felici of STMicroelectronics. In 2000, he says, about 50% of the SIM cards carried 8 kilobytes of application memory, 30% had 16K and 20% had 32K. This year, he predicts, 8K and 32K cards will each take 35% to 40% of the market, as operators either offer low-end prepaid cards or the most powerful cards available. By late 2001, he says, SIM cards carrying 64 kilobytes of memory will begin appearing. Higher memory means higher prices, says Phillips. He estimates 8K cards cost under $4, compared with around $5 for 32K cards. Chip Shortage Continues Also keeping prices high is the worldwide shortage of computer chips, which continues in 2001. But it could get a little easier to find chips later this year, as new semiconductor capacity comes online and the growth in demand slows, says Karsten Ottenberg, vice president and general manager of the identification business line at Philips Semiconductors NV, Eindhoven, the Netherlands. He predicts overall semiconductor demand will increase 20% to 25% in 2001, compared to 40% in 2000, "so the high imbalance in demand and supply will have some softening." Smart cards represent only about $1 billion of the $200 billion global semiconductor market, he says. New Fees Needed The shortage of SIM card chips is but one of the problems for mobile phone operators. Even more pressing is their need to find new revenue sources to pay for the billions they are investing in licenses to provide the next generation of high-bandwidth mobile phone service. European operators alone have committed $100 billion for the so-called "third-generation" licenses, and are expected to spend a comparable sum building the 3G networks. Given that massive investment, operators will have to generate between $5,000 and $15,000 per customer over several years to recoup those license fees. That has set off a desperate search by telcos for new services they can offer consumers to generate new user fees. That search puts operators on a collision course with banks, which want to play the central role in handling the flood of transactions consumers are expected to make through cell phones. Smart cards are at the center of this battle because they are the tokens that identify the consumer. If the mobile phone operator controls the identification application on a SIM card, then the operator can charge a fee for handling that transaction. On the other hand, if the operator merely is passing the transaction on to a bank, the operator's role and revenue will be reduced. Banks have made clear they prefer to control the authentication service, and are reluctant to use the operator's SIM card as the ID token. "It is a question of who is controlling the identity of the consumer," says Bo Harald, executive vice president of the north European banking conglomerate Nordea, formerly MeritaNordbanken. "For us, it is very important from a security point of view that is the bank." Nordea is preparing to launch a pilot this year along with Visa International and handset manufacturer Nokia that would put a second chip card into the mobile phone-a Nordea-issued Visa credit card as small as a SIM card. In France and Spain, meanwhile, banks and telcos are cooperating in tests of mobile phones with a clip-on card reader that allows consumers to make payments with full-size, bank-issued smart cards. Signing By Phone Mobile phone operators, however, have plans of their own to use highly sophisticated SIM cards to offer new services. At least three European operators are preparing to issue "mass quantities" of SIM cards that will allow consumers to use their mobile phones to electronically sign documents, says Thomas Koelzer, chief operating officer of the Secartis AG unit of Munich-based smart card manufacturer Giesecke & Devrient. The cards will carry key pairs tied to digital certificates stored on the Internet. This is an application of public key infrastructure, or PKI, a technology that encrypts data and identifies the individual making a transaction. PKI is highly touted as a way to prevent consumers from ordering products or placing an order to buy or sell stock and then denying that they are responsible for the transaction. While Koelzer would not identify the operators, he says their services will be tested early this year and launched soon afterwards. With the aid of a PKI-enabled SIM card, Koelzer says, telcos will be able to offer valuable services to subscribers and content providers. He says Secartis also is working with a German mail-order house that will take orders via the Internet so long as the consumer digitally signs the order with the handset, responding to a confirmation sent by the retailer. Government agencies plan to allow citizens to sign documents electronically through their PCs using PKI, and some of those services also are likely to be offered through GSM phones, he says. Electronic Signature Laws More and more countries are recognizing electronic signatures as legally valid, and that will spur more use of PKI with smart cards, both SIM cards in mobile phones and full-size chip cards. For instance, the United States enacted an electronic signature law last year and the 15 members of the European Union are obliged to pass similar laws, as well. These laws will spur the use of PKI as a secure way to authenticate individuals conducting business via the Internet or through such devices as mobile phones or handheld computers. "If you want to do serious business, you must be able to do serious contracts," says Pekka Honkanen, senior vice president of Sonera SmartTrust, a spinoff of Finnish telco Sonera that specializes in securing electronic transactions. "And you need laws to protect you so that the customer signature and ID cannot be repudiated by the customer." One SmartTrust customer trying out PKI and SIM cards is the Finnish online securities broker, EVLI Securities PLC. The company began testing last year a service that allows consumers identified with digital credentials to access their stock portfolios and to make trades. The company says it will roll out the service during the first quarter. And PKI is not the only new technology showing up in SIM cards this year. Japan's NTT DoCoMo, which has more than 10 million mobile phone users accessing the Web through its groundbreaking i-mode service, will introduce some of the first 32-bit smart cards to hit the market. These cards process four times as much data at a time as standard 8-bit cards, processing power that will come in handy when DoCoMo begins downloading more data, and even sound and video, to customers' cell phones. The 32-bit chips also will make possible more sophisticated smart card applications in many arenas, and represent an important milestone, says David Levy, CEO of Bull Smart Cards, Louveciennes, France. "In 2005 you will say there was a big breakthrough in 2001, because this was really the start of the 32-bit platform," Levy says. But Philips' Ottenberg says the 16-bit chips his company offers are adequate for now. He says it will be 2003 before smart cards require 32-bit chips. While vendors debate that point, some of the SIM cards NTT will roll out from Dai Nippon Printing of Japan will use software from Bull and 32-bit chips from STMicroelectronics. Not Just GSM NTT DoCoMo will also be among the first non-GSM operators to introduce SIM cards into their phones. Korea Telecom Freetel, which uses CDMA mobile phone technology that does not require smart cards for subscriber identification, introduced SIM cards late last year. That allows a Freetel subscriber to pop the SIM card out of a handset and to insert it into a GSM handset when traveling to countries where GSM is predominant. Besides allowing customers to retain their phone number lists and preferences, that ensures that their phone calls are routed to Freetel, which then bills for the calls, and not to the GSM operator in the customer's location. A third digital mobile phone technology, TDMA, is converging with GSM, and will use SIM cards in future phones. Part of the reason is that SIM cards make it easier for operators to develop and distribute new applications for their customers. "Where can you buy application development tools for a Nokia phone?" asks Mike Dusche, Windows for Smart Cards product manager at Microsoft Corp. "The answer is you can't." But smart card vendors offer such development tools for their SIM cards, making it easier for mobile phone companies to introduce new features, regardless of the handsets used by their customers. While Sun Microsystems' Java Card has established a clear lead in the SIM card market, Microsoft is paying a lot of attention to SIM cards, as is the MAOSCO consortium that promotes Multos, the third competitor among the smart card operating platforms that can be licensed by multiple card vendors. For now, SIM cards are where the money is. And there is little doubt 2001 will see smart card players introducing their most sophisticated technologies into this segment of the chip card market. Financial services: Smart card players will be watching this sector closely this year, more for the quality of smart card programs on tap than for the quantity of cards issued. Nonetheless, the numbers will be quite healthy. Dataquest's Phillips. says shipments of chip-based payment cards will grow 35% from 176 million cards last year to 238 million cards in 2001, he says. Fueling the numerical growth will be the ongoing conversion of magnetic-stripe credit and debit cards to chip in such countries as the United Kingdom and Brazil. Some 20 countries, two-thirds of them in Europe, have committed to moving their bankcards to chip over the next five years, and that will fuel even greater growth in the financial sector. Phillips predicts by 2004 there will be 459 million bank-issued smart cards in circulation. But all eyes this year will be on the United States, where issuers have made no commitment to chip cards, because the world's largest payment card market has developed sophisticated technology to deter the fraud that is moving other countries to abandon mag-stripe cards in favor of smart cards. Copyright 2001 Thomson Financial
Media Title: 2001: A Smart Card
Odyssey: Part 2 of 2 Wooing Prime Customers What makes the U.S. market exciting for smart card vendors is that credit card issuers are beginning to introduce smart cards in large numbers for reasons other than fraud-reduction. Following the lead of the groundbreaking launch of the American Express Blue card in the United States in 1999, three Visa issuers announced last fall that they will issue chip cards designed to make shopping on the Internet safer and more convenient. More Visa issuers are expected to follow suit early this year. And MasterCard International executives say some of their big issuers also will introduce chip-based credit cards. The Internet is what makes smart cards suddenly attractive to issuers, says Jay H. Lee, senior vice president of Fleet Credit Card Services, a Boston-based bank that launched its Visa-branded Fusion credit card last fall. "That's the reason smart cards are going to take off this time." But real success, he says, will only come if the chip-based cards offer a variety of other features. He predicts issuers will join with such companies as airlines and movie theaters that will add valuable services to bank-issued chip cards. If a few major initiatives like this are launched successfully in 2001, Lee says, "then people will take these things more seriously." Banks elsewhere also are looking at smart cards as a way to lure Internet-savvy customers and to offer new services through partnerships with nonbank companies. Nordea, for instance, plans to begin this fall converting its mag-stripe cards to smart cards that conform to the EMV standard for chip-based credit and debit cards developed by Europay, MasterCard and Visa. While Harald was reluctant to discuss the features on the new smart cards, he says they will carry credentials allowing customers to identify themselves on the Internet and through mobile phones. That digital ID then becomes a magnet for other service providers, he says. "Once you have an EMV chip card it is pretty natural to offer your chip cards as a carrier of other services," Harald says. "There is a very strong ID tool in the hands of every customer." AmEx On The Move Smart card executives will also keep their eyes on American Express, which has followed up its Blue card success in the United States-where insiders say some 3 million Blue cards are in circulation-by launching an array of chip-based Blue and Green cards last year in the United Kingdom, Sweden, Italy and the Netherlands. The cards mainly have credit applications on the chip so far, but AmEx has tested over the years several programs aimed at using smart cards to woo its target market segment: upscale business travelers. These include programs with hotels and airlines that take advantage of the chip card to make life more convenient for the weary traveler. AmEx executives, as is their custom, are keeping mum about any plans. But if they launch innovative chip-based programs, they will have an international customer base ready to take advantage of them. Mass transit: More sophisticated contactless smart cards carrying microprocessors will appear in big numbers this year, making it possible for transit operators to share their cards with banks, merchants, municipalities, schools and others. The big question is whether such entities will want to add their applications to smart cards used by commuters. The technology for multiapplication transit cards has been available since microprocessor-based contactless cards appeared in 1999, notes Andre Ampelas, head of information technology at the Paris transit agency RATP. Unlike the memory cards used in groundbreaking transit projects in Seoul, South Korea, and Hong Kong, microprocessor cards are secure enough for operators to allow commuters to reload value via the Internet and banks to use the same cards to offer customers an electronic purse for making small purchases, Ampelas says. Such a card would have both a contactless interface for transit and a standard contact plate for the e-purse. "But to go wider, you need the banks, and the banks are going slowly," he says. The obstacle, he says, is that both banks and transit operators want to retain the primary relationship with their customers. Whether or not banks are ready to form partnerships, several major transit agencies will introduce this year microprocessor-based chip cards that Ampelas believes are a better investment for the long term than less-expensive memory cards. In fact, STMicroelectronics' Felici predicts there will be 30 million contactless smart cards with microprocessors produced this year, double last year's output. Paris, for instance, will issue 1 million annual passes on contactless smart cards in 2001, and replace its magnetic-stripe weekly and monthly passes with smart cards in following years, Ampelas says. Also this year, Paris will complete its rollout of smart card readers at 800 subway stations and 5,000 buses so that riders can use the chip cards throughout the Paris system. Advances In Asia Two big projects will roll out in Asia. Tokyo's JR East commuter line will issue 6 million contactless smart cards, and Taipei transit operators are expected to distribute 3 million chip cards to their riders. Asia saw the introduction last year of a microprocessor-based smart card that can be used in both contact and contactless mode in Pusan, South Korea's second-largest city. Pusan Bank issued the cards that can be used to pay subway and bus fares, make purchases and to access Internet-based government services. Those cards are based on the Mifare contactless technology of Philips Semiconductors, a protocol that became type A of the ISO 14443 standard for contactless chip cards finalized last year. Philips has enhanced its technology so that a dual-interface Mifare card can complete a contactless transaction with sophisticated RSA encryption in under 400 milliseconds. That would allow a bank-issued e-purse to be used for payment in mass transit, without slowing down commuters as they board, says Philips' Ottenberg. He says there is a project testing the technology, but declined to provide details. Meanwhile, Type B chips from STMicroelectronics are being used by Motorola Inc., Schaumburg, Ill., in several transit projects that include nontransit applications. For instance, in Ishmir, Turkey, a city of 3 million, the transit authority has issued about 1 million cards for payment on subways, buses and ferries. In addition, a conference center uses the same cards for access to exhibits and as an electronic purse, says Mario Di Prizio, director of engineering and product development in Motorola's Worldwide Smartcard Solutions Division. An Anchor Application In Rome, Motorola will roll out at least 350,000 dual-interface cards by the second quarter, with both transit and parking applications. With Motorola committed to run the Rome card system for at least 10 years, Di Prizio says authorities are seeking other features to add to their chip cards. "The multiapplication business arrangements can now move on at their own pace, because the infrastructure has been taken care of by the anchor application, which is transit," he says. Meanwhile, Motorola's frequent partner in transit deals, ERG Ltd. of Balcatta, Australia, is moving forward with the rollout of 1.2 million smart cards in Manchester, United Kingdom. A company set up by ERG and UK bus operators called Prepayment Cards Ltd. hopes to have merchant loyalty and city services on the cards, which will be used to pay fares on Manchester buses. Motorola also is the prime contractor for another major project that will begin this year, a test of transit smart cards in the San Francisco Bay Area. While more than two dozen bus, train and ferry operators potentially could share the same TransLink card, the fate of the project will depend upon a successful test, says Russell Driver, TransLink project manager for the Metropolitan Transportation Commission. "In North America, when people do a first phase, even under the name of a pilot, it's really a foregone conclusion they're going to roll it out. That isn't the case in the Bay Area," Driver says. "There are a lot of eyes on this project, a lot of political interest," he adds. "So our evaluation is going to be very explicit and very public." Driver says the transit authority will measure system performance, customer satisfaction and the reactions of transit workers to the smart card system. "The whole industry will benefit a great deal from that." The pilot, with about 4,500 riders, is set to begin in May. An unsuccessful outcome could set back smart cards, especially among U.S. transit operators, while a decision to go forward would reinforce the momentum created by smart card projects in the Washington, D.C., and Chicago subway systems. Government: Government is another area in which projects will have significance beyond their 2001 volumes. That is largely because government projects will provide important testing grounds for sophisticated electronic commerce identification technology. Apart from health cards in France and Germany, where most residents carry chip-based health cards, government projects represent only .2% of the global smart card market, says Frost & Sullivan analyst Anoop Ubhey. And government projects often proceed slowly, and can be derailed when one political party replaces another. Nonetheless, those projects can be big, and they can showcase leading-edge technology. That is certainly the case with projects rolling out in the United States and Malaysia. The Pentagon Charges Ahead The U.S. Department of Defense announced last fall that it was beginning to issue smart cards to civilian and military employees and selected contractors who do business with the Pentagon. By the time the department's fiscal year ends in October, the Pentagon plans to have issued 1.3 million chip cards, with a goal of distributing 4 million smart cards by October 2002. While each unit within the Pentagon will choose from a menu of features, the driving force behind the introduction of smart cards is Internet security. Each chip card will carry a digital certificate that will identify the cardholder, allowing department employees to sign contracts and authorize purchases electronically. Pentagon officials believe this could cut purchasing paperwork by 85%. The Pentagon project could be among the largest uses to date of PKI to secure electronic commerce. While widely viewed as ideally suited for the Internet Age, PKI has taken off more slowly than expected, largely because of the cost and complexity of implementing it. "Everyone is going to be watching Defense so closely," says Bill Holcombe, director of card technology at the U.S. General Services Administration, which has been leading the U.S. government's smart card efforts. "The key to success for them is whether they can build out the PKI infrastructure properly." Another U.S. agency moving aggressively into smart cards and PKI is the Department of Veterans Affairs, which provides medical and job-training services to 3.6 million veterans of the U.S. armed forces. The agency plans to distribute smart cards to 200,000 veterans in the Midwest by the end of April, and plans to issue 4.6 million chip cards by the end of 2002 so that every veteran will be able to use the Internet to access medical data and fill out forms, says Kent Simonis, director of health administration services at the VA. He says the chip cards will have digital certificates so veterans can file required reports electronically, signing them with digital signatures. Italy also plans to issue 1 million smart cards this year with digital credentials to enable citizens to sign documents electronically, with a wider rollout set for next year. And Malaysia's new national ID card also will feature PKI, although not in its first phase, says Wan Mohammed Ariffin, project manager for the Government Multipurpose Card. The Malaysia smart card initially will carry four applications: citizenship data, driver's license, passport and a Proton electronic purse. The card also will carry a digitized version of the citizen's fingerprint for ironclad identification of individuals to government officials. In the future, Wan says, the cards will carry digital certificates, allowing citizens to use the Internet to conduct business with the government. The government plans to issue 2 million cards to citizens in the area of Kuala Lumpur, Malaysia's capital, starting in April. Officials plan to roll out the card to the rest of the country of 21 million in 2003. Other Asian countries are looking at similar smart ID cards, with digital credentials. "People in government are talking about e-commerce being a key part of these ID cards," says Greg Pote, executive director of the Asia Pacific Smart Card Association. "They see this as a way to deliver government services that could save them a lot of money and make them more efficient." Pote says Taiwan is introducing a chip-based health card that could be the first step toward a national ID card. Taiwan officials say they plan to issue 22.5 million smart cards in May 2002 containing health insurance data. Hong Kong also is discussing using a smart card as an ID. Officials in China have spoken about introducing a contactless smart card with a fingerprint biometric to replace China's paper ID card. That project could dwarf the rest, as it would require issuing more than 800 million chip cards. But few insiders believe the project will get off the ground in 2001. Network Security: The smart card industry will closely follow in 2001 advances in using chip cards to secure access to corporate computer networks, a technology linked to PKI that also has caught on more slowly than some predicted. One company that is beginning to use smart cards for that purpose is Microsoft. Bill Gates, chairman of the software giant, announced last month at a conference on computer security and privacy that his company was giving smart cards to 1,000 network administrators who monitor the company's network and grant access rights to corporate data to other Microsoft employees. "At Microsoft, we've decided that for certain applications internally we are going to insist that the person authenticate themselves not just with a password, but also with a smart card," Gates said. "A good example of this are our network administrators. You want to make sure that those people are authenticated in a very strong way as they come into the system." A Gentle Reminder Gates pointed out that the administrators must leave their smart card in the reader to stay active on the network, and take it out when they leave their office. To remind them, he said, the same card also will control access to campus buildings. "And so if they leave the smart card in there and they go out of the building, then they won't be able to get back in the building, and that will remind them that they're supposed to have smart card with them," Gates said, as the audience chuckled. Some are hoping that Microsoft will further boost smart cards through the growing use of its Windows 2000 operating system-the successor to Windows NT for corporate networks. Windows 2000 has a built-in option that allows network administrators to require workers to insert smart cards in order to use their office PCs. Microsoft has a Rapid Deployment program for Windows 2000, in which 150 corporations are participating, all of them piloting smart cards for log-in with employees, says Microsoft's Dusche. He says 7 million individuals now use Windows 2000, although he could not say how many of them use smart cards to access applications and data. Ultimately, he foresees corporations issuing multiapplication smart cards for employees to use not only for computer sign-on, but also to enter buildings, to pay in the cafeteria, and even for such fun uses as carrying digital rights to listen to Web-based music. But issuing cards for use by more than one organization increases the complexity, he says. "The previous model never really contemplated multiple entities using a smart card. Your bank gave you a smart card and it was the bank's property. Nobody else had to put applications on it." That pretty much sums up the challenge facing smart cards in many arenas-different kinds of organizations have to collaborate to make the cards attractive to end-users and to cover deployment costs. In such diverse segments as banking, mobile phones and transit, 2001 will provide a test of whether smart cards can leap over that barrier and make their way into widespread use. Banks Move To Chip Cards 1999 114 2000 176 2001 238 2002 324 2003 395 2004 459
Millions of smart cards issued per year by financial institutions. Source: Dataquest
Steady Growth ahead
Year Units % Growth Revenue % Growth
1999 1,459.3 1,652.9 2000 1,651.8 13% 2,057.3 24% 2001 2,022.4 22% 2,765.3 34% 2002 2,385.3 18% 3,440 24% 2003 2,869.3 20% 4,179.7 21% 2004 3,323.4 16% 4,777.3 14%
Global smart card units in millions; revenue in millions of dollars Source: Frost & Sullivan
Copyright 2001 Thomson Financial
Media Title: Obstacles
may trump data-packed Super ID By: laura koss-feder Imagine one card that could be used for banking, shopping, making phone calls, submitting medical insurance forms and getting into the office. Europeans already use a single card every day for the first three functions and are testing the last two. But for Americans, this magic, data-filled card will have to stay imaginary for the foreseeable future. While U.S. shoppers have become fairly comfortable using debit ``smart cards'' and while even smarter versions have recently been introduced, virtually no one expects to see anything like the European types cross the ocean. At most, Americans might get several cards, each handling one fancy function. ``Sophisticated New York shoppers are looking for more applications and functionality (on a card),'' says Martin Wittwer, vice president of smart card enterprise development for American Express Co. in Manhattan. ``But I'm not convinced that ultimately, U.S. customers will want one super card that has all their personal, private information on it.'' Too easy to steal Experts agree that security-conscious Americans would feel nervous having so much vital information stored on one card that can easily be lost or stolen. Another impediment for so-called Super ID cards is that in the United States, unlike Europe, there are many potential card issuers, which makes it harder to set uniform standards. Certainly, Americans seem to have no problem shopping with a simple smart card-the kind that automatically debits their bank accounts. An estimated 15 million were used over the last year in the United States, and the value of smart card and similar electronic transactions is expected to skyrocket to an estimated $20 billion in 2002 from $500 million this year, according to Peterborough, N.H.-based ActiveMedia Research. Banking and shopping Americans are also using smart cards for basic banking functions, such as checking their account balances and making transfers. Going a step further, American Express a year ago launched its smarter Blue card, which hooks up a smart card reader to the on-line shopper's personal computer. Mr. Wittwer says this adds a level of security because a shopper needs both a personal identification number and an actual card to make a purchase. With a standard credit card, on the other hand, on-line shoppers need only a PIN or card number. But that innovation is a far cry from one-card-does-all. In theory, the Super ID would be used the same way as a credit card: A user would plug it into a card reader, ATM machine, special phone or the like, which would then download the appropriate information and charge the user's account. For Europeans, this isn't such a big step. They are already accustomed to the concept of a single powerful document, since they've been carrying passports or other government IDs on a regular basis for years. With the higher crime rate in the United States, however, Americans are more worried about valuable cards being stolen. In addition, European smart cards are often issued and regulated by the government. As a result, stores, phone kiosks and other places where cards are used need to install only one type of card reader (at least, one in each country). By contrast, all sorts of companies issue cards in the United States, making it hard to create uniform smart card readers, says Chris Rieck, vice president of marketing communications for emerging technologies at MasterCard International in Purchase, N.Y. Still, Americans love gadgets and technology, so ultimately they're likely to demand some of these bells and whistles. The best way to combine smartness and security might be with several not-so-smart cards-one for banking, one for medical information, one for shopping. ``For a smart card to work, it has to have related functions geared toward one main usage, like travel or shopping, rather than all-in-one capabilities,'' says Mr. Rieck. ``People feel more comfortable with this.'' Copyright 2000 Crain Communications
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Title: Motorola
technology could replace product bar codes By: Mike Dano A new technology from Motorola Inc. could potentially replace product bar codes-the series of lines printed on product packaging that identifies everything from toothbrushes to new TVs-with a tiny, disposable wireless transponder. That's the vision rattling around in the head of Rich Krueger, director of business development for Motorola's smart cards division. Krueger is the head of a five-year effort to create a credit card-sized label that sports a tiny computer chip and can wirelessly connect to a computer scanner. The technology is called BiStatix, and Motorola is gearing up to release it into the marketplace later this year. ``We believe we will see a number of installations by the end of this year and early next year,'' he said. ``The very first products popped out a few months ago.'' BiStatix technology got a trial run in March in the Chicago Museum of Science and Industry's Networld attraction. Museum visitors were able to purchase a Netpass card with an embedded BiStatix radio-frequency identification chip. Users could wave the card over RF readers to call up museum information. The possibilities of expanding on this simple function are virtually boundless, Krueger said. And one such application-replacing product bar codes with BiStatix-based Electronic Product Codes-is now being discussed by the Auto ID Center, a group of retailers and manufacturers looking to improve supply chain efficiency with RF technology. Most RF transponders use a metal antenna to communicate with an RF reader, which makes them too large and expensive for mass-quantity use. BiStatix technology replaces the metal antenna with conductive ink, which can simply be printed onto regular office paper. This allows BiStatix RF transponders to fit on anything from an address label to an identification card, and produced in huge quantities with little cost. ``That's really the principle innovation here,'' Krueger said. ``When that tag is brought into proximity of a reader ... the signal itself energizes the reader.'' When the RF reader gets within about a foot from the BiStatix transponder, it charges the label's conductive carbon ink, which then activates the computer chip. The chip can store up to 100 characters, and the reader can modify the information on the chip. Krueger said there are a variety of products and services that could be enhanced using the new technology. Tickets for sports event or concerts could be printed with the buyer's personal information embedded on them so pickpockets couldn't use the pilfered tickets. Airlines could print off BiStatix tags for passengers' luggage with embedded travel destinations so the bags would be harder to lose (maybe). This would also help bag checkers because they would only need to wave the RF reader around the bag instead of having to line the reader up with a crumpled bar code. Finally, amusement parks or public transportation companies could use BiStatix cards to determine which customers paid for which services, and then could wirelessly change the card's information depending on its use. Krueger said Motorola has spent the past two years getting various parts of the industry in line with BiStatix technology. Companies from label makers to original equipment manufacturers to systems integrators are getting set to begin offering BiStatix-based products, he said. Copyright 2001 Crain Communications
Inc.
Title: INSIDE
TRACK: Your fingerprint is the password: SECURITY SYSTEMS: Biometric ID systems are effective and can help cut
costs, says Geoffrey Wheelright: Biometric technology is rapidly becoming a crucial element of business security solutions. Long the province of spy films and popular fiction, devices that can identify people by scanning their fingerprints, retinas, or even the shape of their faces, are now being used to do something much more mundane: to cut costs. Maintaining appropriate levels of security for a broad variety of business applications within a large corporation or financial institution is expensive. Strict rules are put in place to ensure that security is not compromised - particularly where identification and passwords are concerned. Users are often required to maintain separate ID and password combinations for different applications, as well as being required to change passwords regularly. These requirements can lead to problems for users - and those who develop and maintain security applications. For example, if users are required to remember a lot of passwords they are tempted to stick with a fairly standard collection of words that usually includes a user's own name, the name of a child or a pet - or even the word "password". Such passwords are easy to guess for anyone who has even a little personal information about the user. If users try to maintain secure and random passwords and IDs, they are prone to forget or lose them. If this happens, they often end up contacting their company's help desk - thereby increasing support costs. One financial institution in Canada recently decided to use biometrics as a way to achieve higher security while reducing security support costs. The Credit Union Central of British Columbia has a range of web-based applications that allow member branches to access crucial financial services functions. According to Oscar van der Meer, associate vice-president of technology services at Credit Union Central, the number of ID/password combinations that employees were having to remember to access those applications was creating problems. Mr van der Meer says something like 60 per cent of all support calls from staff at its network of 70 independent credit unions - which hold combined assets of almost C$24bn (GBP10.8bn) and employ 7,000 people - were to do with ID and password problems. So Mr van der Meer and his staff set about finding a new way of verifying the identity of staff members when they were accessing crucial business applications, (such as the application controlling wire transfers of money. "When people walk into a room you can use voice ID but for remote applications [such as those being accessed on the web] you need to know that people are really there," he explains. "We looked at a number of other different options - including comparing smart card certificates and using face recognition, fingerprint recognition, voice recognition and retinal scanning. "But, in addition to improving security, cost was also very important. Each retinal scanner would have cost about C$1,000. Face recognition was not secure enough. Nor did we want the biometric system to be too invasive, so we concluded that since a fingerprint is a well understood method of identifying people, it would reduce the risk [of users not accepting it] and be cost-effective." Mr van der Meer also says that while smart cards are less expensive than fingerprint recognition systems to implement, the smart card identifies only the card - not the person using it. "It needs procedures around it - a card is not supposed to be shared between employees, for example." The company eventually chose the EyeD Hamster system - a small, plastic box (about half the size of a cigarette lighter) tethered to each desktop computer. The device contains a small glass window on to which a user places a thumb or finger - which allows scanning software to verify the user's fingerprint. Mr van der Meer says this solution has allowed the company to eliminate the use of passwords for many of its applications. So far, it has installed 1,200 of the devices. It appears that Credit Union Central is not the only company demanding the use of biometric technology. International Data Corporation, a Massachusetts-based research organisation, believes that the market for fingerprint-scanning technology, the most common form of biometric technology, will grow to $991.3m (GBP686m) by 2004. But implementing a biometric system is about more than just adding biometric devices to corporate security systems. According to Armgaard Von Reden, International Business Machines' chief privacy officer for Europe, Middle East and Asia, anyone installing a biometric system needs also to be concerned about legislative restrictions on the storage and use of personal data - such as the European Data Protection Directive. Ms Von Reden says, for example, that this legislation may prevent some biometric data (such as a person's fingerprints) from being stored on a company's network. And, where regulations do permit corporations to store such data about their employees (and employees have agreed to the storage of such data), there may be further regulations about the security systems that need to be installed to protect that information. Some companies, such as SecuGen, try to get round this problem by storing a mathematical model of a person's fingerprint - which is solely designed to ensure that the model can be matched against a scan of the fingerprint. The goal is to provide high levels of security but prevent anyone from reconstructing the fingerprint from the stored mathematical model of it. Information may not be copied or
redistributed.
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