Microchips are about to become our best friends. They will remember our birthday, buy us presents, and they might even make us rich.
If smart-cards could talk, they would probably chatter about the many places they expect to be seen. In the workplace, on the World Wide Web, from sports arenas to emergency rooms, manufacturing facilities to retail shops. Smart-chip cards appear an intelligent choice because of all they can do. If companies listened, they would learn of new opportunities to reap huge cost savings, speed transactions, tap information instantly or enhance security for any smart-card user.
Smart cards bear a logo and a sliver-thin, coin-sized dot that is a powerful, embedded microchip. The shiny credit-card-sized sheet of plastic looks and feels much like an ordinary credit-card, though it is much smarter than the card that you carry in your wallet.
Three basic forms of smart-cards handle simple transactions and process and supply data. They can be adapted for a multitude of other uses, even after they leave the stamping machine and are placed in a consumer's wallet.
Stored-value cards: These memory chips hold monetary value, which the user can spend in payphones, retail outlets and in vending machines. Similar in some respects to magnetic-stripe public transport system cards that use collection meters to assess and deduct bus or train fares, these smarter memory cards are not easily copied and are protected if lost or stolen.
Intelligent cards: Containing a central processing unit (CPU) with rechargeable capability that allows new information to be added and processed, this form of smart-card can handle automatic teller machine (ATM), credit and debit transactions, store frequent-flier data or customer-loyalty information. In the future, customers will be able to load various applications according to their individual needs and use multiple-reader devices such as computers, telephones and set-top boxes to pay for premium programming, participate in home shopping, play interactive games or use other on-line services.
JAVA-BASED CARDS
Java-based cards are remotely programmable. New functions can be added without issuing new cards.
Examples of functions that could be added include new loyalty applications and special discount programmes, new employment or health benefits, transit fare-payment plans and event ticketing. Special network and computer-access privileges also can be added on-line.
The roll-out of smart-cards offers profitable opportunities for everyone from providers of technologies to upstart entrepreneurs, retailers, financial and educational institutions, the military and the multinational corporation. End users will benefit from increased efficiencies, and some will even benefit from the new business opportunity of selling tools and infrastructure. A new market will be created for companies that can furnish smart cards as well as the infrastructure for supporting their use. According to a recent study by Killen & Associates, intelligent smart-cards will be recharged worldwide in 2005 more than 27 billion times, an amount roughly equal to 80% of the total number of credit-card transactions in 1997. Consumer preference will bring smart-card charging to such convenient locations as public phones, service stations, grocery, video and convenience stores, and fast-food outlets.
Retailers and companies that become the first to provide recharging services will also benefit from higher traffic and greater sales than their non-participating competitors, just as early providers of ATM machines did. New opportunities will be available for alliances among financial institutions, telephone companies, system integrators, retailers and entrepreneurs to create recharging venues. New entrants will use smart-cards to invade the traditional territory of financial institutions. Smart-chip cards issued by non-banks could capture a significant market share in traditional cash settings, as well as in an Internet environment.
Consider, for example, the non-bank soft-drink and snack-food companies as potential smart-card entrepreneurs. For these businesses, the use of stored-value cards already creates powerful collection efficiencies and cost-reduction opportunities. Businesses that adopt the first wave of the technology will gain experience, find the right combination and create strategic relationships. Smart-cards and their ability to hold digital signatures will be vital components of applications such as corporate Internet transactions, electronic commerce, home-banking, personal-identity and healthcare services. Providers of turnkey smart-card authentication and security systems will win big.
Also, companies that move quickly to understand and adopt the special features of smart-card security could improve their competitive position through the security system efficiencies and enhanced functionality. More than 40% of all network help-desk calls involve resetting passwords for employees. Firms can eliminate these calls as smart-cards automatically identify users, making passwords obsolete. According to United States-based research firm Forrester Research, once smart-card systems are in place, a 20,000-employee company can save US$4 million in lower help-desk costs, as employees are freed from password amnesia.
Secure smart-card access will make possible cost-effective decentralisation of network security. Once employees have smart-card identification cards, companies will find other applications for them. Enterprises will combine enrollment, physical security and parking privileges into the corporate smart-card, saving as they combine traditionally disjointed systems.
ONE CARD, MANY USES
In North America, more than 30% of the 3,500 college and University campuses use cards for identification purposes. Educational facilities that use traditional magnetic stripe cards will move to smart-card technology to centralise all functions, including parking, meal payments, library borrowing and vending machine purchases.
Despite impressive growth forecasts for smart-cards, there remain barriers to success: Price, standards and infrastructure, as well as consumer and retailer acceptance of the technology.
Few smart-cards are compatible globally because of the Swiss-army knife-style of card is difficult to produce cost-effectively. Also, the cost of converting existing card-reading infrastructure to read smart-cards is prohibitive. Feedback from consumers has been positive, but retailers are likely to balk at installing more hardware to read consumer cards.
Despite these problems, the smart-card market is expanding and companies that will benefit most from the widespread adoption of the technology will be the ones that embrace the concept in the next two to three years.
This article was contributed by AT Kearney, a management consultancy company.
Return to our
Page