These not-yet-ready-for-prime-time card products may be the next American idol.
From Software developers to plastic card printers and a variety of specialists and consultants in between, smart cards are beginning to attract a lot of attention here in the United States. As expected, costs are coming down, yet they remain prohibitive for most. Still, it is only a matter of time before customers dependent upon a secure, efficient and intelligent approach to operations management are clamoring for this solution.
Proactive distributors and manufacturers who begin learning now will be earning later as a result of a smart card education.
Slowly but Surely
Headquartered in Pittsburgh, Alegra Technologies is a smart card manufacturer that has relationships with the world's leading silicon manufacturers, smart card integrators and hardware manufacturers. According to CTO Jim Canfield, the company currently specializes in the GSM (Global Subscription Mobile Communications) market, which is the type of mobile phone used in most of the world—the United States typically employs CDMA (Code-Division Multiple Access) digital cellular technology. However, Canfield expects the United States to go the way of the rest of the world and adopt GSM. "Then, we will really be seeing our work take off here at home," he said.
Canfield explained that mobile phone smart cards utilize an SIM (Subscriber Identity Module) card with a chip in it. "For instance, behind the battery in my phone, there is a little ID card with a 19-digit number on it that holds subscriber information. When the card is inserted, it allows the phone to authenticate through a network and identify the user. The card can be used in any enabled phone, allowing it to receive my calls and contain my phone book and all of the other applications I have on my phone. Technology that provides authentication onto a network not only simplifies billing, but it is also more convenient for users."
Canfield went on to say that at present, the government is the real driver when it comes to the standards that are being adopted in the United States for smart card-enabled applications. "The Department of Defense has approximately five million cards in the field right now," said Canfield, "and that is going to explode as smart cards are rolled out to all of the contractors that work with the government."
He also observed that the health-care industry appears to be following the government's lead as it continues to assimilate HIPAA (Health Insurance Portability and Accountability Act) regulations into business operations. "Smart card technology has been identified as the best and easiest way to secure, log and control access to digital patient data," Canfield reported.
In fact, Alegra Technologies is assisting several large U.S. health-care organizations engaged in smart card pilot programs. "We are providing the cards and technology," explained Canfield. "In some cases, we act as a co-contractor with a software house or we work directly with the health-care organizations' IT specialists, which ultimately makes the integration a lot easier. There are numerous disparate data systems that need to be brought together, and it is more difficult for an outside group to accomplish this."
When it comes to the larger and more complex projects, Canfield acknowledged that smart cards may be a cumbersome technology for independent distributors to offer their customers right now. "However, with health-care, for example, organizations of all sizes will be required to comply with HIPAA requirements and, as things trickle down, there will definitely be levels at which more off-the-shelf products could be seen as workable solutions."
Closer to Home
In June of 2003, Boston-based Arthur Blank & Co. entered into a strategic alliance with Alegra Technologies. "Since our alliance with Alegra, we have seen a large increase in smart card manufacturing," said Eric Domschine, marketing manager at Arthur Blank & Co.
Domschine pointed out that Frost and Sullivan—a market consultant specializing in emerging high technology—anticipates that the compound annual growth rate for unit shipments of smart cards in the United States between 2002 and 2006 will be 9 percent. In terms of revenue, international business research company The Freedonia Group projects that the U.S. market will be worth $475 million in 2006, compared with $150 million in 2001. "That includes chip cards, readers, software and services," he added.
Domschine observed that entry-level smart card prices have come down as the technology has advanced. "The ability to spend less for the same product just a few years later is common in silicon-based products as the manufacturers fine-tune their architectures," he said. "There is still a high price on the latest technologies, and their value is best evaluated within the appropriate market segment."
Smart cards are currently used in various applications, including physical access/identification, logical access, security, credit cards, mobile phone technology, loyalty and stored value/e-purse, and Domschine believes that banking, retail, government, corporate and campus IDs, satellite/pay TV, mass transit, health-care, vending and gaming are strong potential markets. He recommended a broad base of smart card technology knowledge as the best approach to sales. "Specific product knowledge, though helpful, will always need to be supplemented with additional silicon- and software-specific support," he continued. "The plethora of products and software really require constant updating of one's own knowledge base."
At RMF Printing Technologies, Lancaster, N.Y., the ColorCards division began receiving orders to print on smart cards approximately two years ago, and the cards have become a fairly common product in the shop. "We are geared to the smaller-quantity market from 250 up to 30,000," explained Vice President Rich Sander. "The customers that we have are implementing systems for their clients, so they are very familiar with the readers, and have already determined which card and chip technology is most compatible with the end-users' needs."
For example, one smart card print job was for a laundromat on a Caribbean island. "The machines were set up with readers that deduct the cost of processing the laundry. There are a few companies out there that are specializing in converting commercial appliances for smart card-enabled operations."
Sander acknowledged that the market is relatively new and relatively slow to start up, due to the need for specific reader equipment. "However, potential markets exist wherever magnetic stripe card conversion is a possibility," he added. "But, the cost of the equipment to read the card, whether it is contact or contactless, is considerable."
Like Canfield, Sander noted that real growth is expected in government and health-care applications. "The travel industry is also quite promising," he added, "where smart cards could be used to promote a city or a tour. University settings are another potential market, where smart cards could eliminate the need to handle money in bookstores, laundry facilities and cafeterias."
By Maggie DeWitt
- Companies:
- RMF Printing Technologies
- People:
- Eric Domschine
- Jim Canfield
- Places:
- Pittsburgh
- United States