Replacing magnetic stripe cards with smart cards can improve efficiency and security.
A long time ago, in a place far, far away— Europe—smart cards were invented to reduce the prodigious amount of theft and fraud involved in the telecommunications industry.
In order to prohibit high-tech thieves from duplicating legitimate phone cards, a new card was developed using an embedded microchip to store data and cryptography to protect the integrity and privacy of card-related transactions.
Today, there are billions of these cards—called smart cards—in use across Europe and Asia, yet there are only a few million in the United States. The reason, explained Roland Four-nier, product manager, RSA Security, Bedford, Mass., is because while European nations laid the groundwork for smart card technology, magnetic stripe cards were already ubiquitous in the United States. Twenty-five years later, smart cards are finally making it stateside, but it's an uphill battle.
"Smart cards are more expensive than magnetic stripe cards," noted Fournier. "Magnetic cards run between $1 and $2 per card while smart cards run about $10 each, depending on memory size."
Smart card read-ers, devices used for reading the information encrypted into each card's chip, are also expensive. Despite these concerns, distributors should consider the benefits of smart cards and how applying them to a client's current operation could improve security and save money.
"The value of smart cards is that in addition to storing information, they can process data and execute small programs," said Dr. John Butterworth, chief scientist, Security Sciences International, Redondo Beach, Calif.
Manufacturers have numerous applications for these microchip-enhanced wonders. For instance, at universities smart cards have been used to identify students, maintain financial, library, grade and attendance information and provide building security. With the addition of an e-purse program, students can also purchase food on a meal plan or buy supplies in the school store.
Hospitals and insurance companies can also benefit from smart cards by using them to ensure that patients' records are accurately maintained and to help administrators avoid multiple billings to insurance companies, patients and third parties. In addition, the cards can be used to store basic medical information, drug sensitivities, current conditions and doctors' names.
To Infinity and Beyond
In fact, the uses for smart card are limitless. By distilling identification, banking and security features into one piece of plastic, businesses can streamline accounting, eliminate paperwork, improve security and reduce the cost of financial transactions.
"I look at it as a way to authenticate a person and to store multiple applications in one card," said Fournier. "We have a client in New York City whose employees use smart cards as ID badges for computer and building security and as e-purses for the company cafeteria."
Smart cards also make great advertising vehicles. Whether businesses decide to offer customers memory-only cards as part of a customer loyalty program, or microchip-enhanced cards for a custom application, smart cards can drive sales and build brand identity. "Smart cards portray the image of a high-tech company with a progressive outlook," noted Ken Greenwood, business development manager, SchlumbergerSema, Austin, Texas. "Plus, they offer an opportunity to advertise on something people carry around in their wallets."
Though it may be hard for distributors to imagine offering clients a product four times as expensive as the magnetic stripe card, when they calculate the savings, increased efficiency and marketing opportunities a smart card offers, it's not that difficult.
Some distributors might also be concerned by smart cards' slow adoption in the States, however, proponents say it's only a matter of time before the cards proliferate and their prices decrease.
Several major computer manufacturers are also pushing for smart cards' adoption. Fournier said IBM, Compaq and Hewlett-Packard are currently producing reader-equipped models for consumer use. Because of their ability to minimize financial transaction costs by securely carrying monetary value, smart cards are also seen as the catalyst that will revolutionize Internet-based trade.
Furthermore, now that an agreement has been struck between Europay, Mastercard and Visa, there are protocols in place to help standardize methods of payment and to aid communication between cards and readers. As a result, smart cards represent a potentially great opportunity for distributors in the print industry.
As Greenwood observed: "It's a bit like the first telephone. Smart cards need to start from the top with a large corporation, and then, eventually, distributors need to persuade their clients that there are benefits to using smart cards."
By Allan Martin Kemler