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::Friday in Focus

Looking to a smart future
Friday, October 27 2000
by Barry McCall

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Five years ago all sorts of almost incredible claims were being made for smartcards.

They were going to revolutionise the world of electronic commerce and profoundly influence our lives in everything from the social welfare system to health care and shopping loyalty clubs. Some commentators were even predicting the end of money as we know it -- humble notes and coins would all but disappear, replaced by bits of plastic and metal.

The failure of this revolution to arrive has been attributed to a number of factors, plain old human nature included. But the fact remains that we are little further on in terms of smartcard usage than we were five years ago.

Almost everyone is familiar with smartcards, although they might not be familiar with the technology. A smartcard is the size of a standard plastic credit card with an embedded computer chip. The chip holds various types of information in electronic form with sophisticated security mechanisms. The smartcard most people in Ireland will have experienced is the phone card. Instead of holding the call units information on a magnetic stripe, the Eircom phone card holds it on a chip. The fact that people have been using these cards for more than 15 years hasn't done anything to popularise the smartcard format however.

"The phone card is a great example of how smartcards should be marketed", says Gerry Looby, chief technology officer with CardBase Technologies, an Irish firm specialising in smartcard technology. "People were very aware of its function and almost totally unaware of the technology behind it. I think this is part of the mistake made in other efforts to sell smartcards to people -- the main

effort was in selling the technology rather than in the function."

Despite this relative lack of interest in the technology, smartcards have a number of distinct advantages over traditional magnetic stripe cards. They are proven to be more reliable, can store up to 100 times more information, are far more secure, can perform multiple functions, have a wide range of applications, are compatible with portable electronics such as PCs, telephones, and personal digital assistants, and they can evolve with new generations of technology.

France was at the forefront of smartcard development when it introduced prepaid smart phone cards almost 20 years ago. Since then it has been followed by more than 80 countries. The advantages of the cards in this area are enormous -- callers need no longer worry about carrying coins, vandalism of public phones has been drastically reduced, and the telephone companies have enjoyed an

unexpected windfall with an estimated 30 percent of the value of all prepaid phone cards remaining unused.

However, with the advent of the prepaid mobile phone the death knell of the fixed line phone card can be heard in the distance. Evidence of this can be found in streets in almost every town in Ireland where new Eircom public phone

boxes are advertising "cards and coins" as opposed to the "coins only" which pervaded just a few years ago.

Interestingly, the prepaid mobile phones that are superseding phone cards also use smartcards. This means that all 1.7 million mobile phone users in Ireland are carrying a smartcard around with them every day. Similarly, every subscriber to Sky Sports or Sky Movies uses a smartcard to decode the channels.

The Sky Sports example is interesting in terms of the fact that several commentators have stated in previous years that smartcards need a form of battering ram to push them into general usage -- just as live football coverage was the means by which Rupert Murdoch pushed Sky into people's living rooms. The phone card was not this battering ram, mainly because there was never any real attempt to get the card to perform any other function than acting as a payment

mechanism for phone calls.


The impetus may finally be given by Ireland's rapidly deteriorating traffic situation. Within the next few years Dublin will have a bus service, a suburban rail service, the DART, the Luas and a metro -- with possibly five different operators. If present conditions are allowed to persist a passenger travelling from Maynooth to Enniskerry would have to pay three or possibly five separate fares to get there. However, there are now proposals within CIE to introduce a smartcard ticketing system that will allow passengers travel on all of the different modes without having to buy separate tickets.

It is estimated that up to 500,000 Dubliners use public transport on a reasonably regular basis and if they are all using smartcards regularly it could have a major impact on the acceptance of the technology here. This idea is not

new. As far back as five years ago the EU-funded SAMPO project (an acronym for Systems for Advanced Management of Public Transport Operations) examined how technology could be used to give increased and efficient public transport

services to customers and it focused on integrated ticketing and payment systems using smartcards.

Looby sees the transport area as a major opportunity for smartcards. "The transit market will get the highest number of cards into people's pockets in the shortest amount of time", he says. "Similar to the phone cards people will not

be interested in the underlying technology, just in the usefulness of the cards. The fact that people won't have to search for coins and so on when they get on an exact fare bus will mean a ready acceptance for the card."

While the "electronic purse" was the focus of most commentary five years ago, Looby does not see cash-only cards being hugely popular. "The cash card will be the next natural use of smartcards for the public, but I would see multi-purpose cards being much more popular in time", he says. "These cards will have credit, debit and cash card functions incorporated in them so people will have a number

of means of payment on one card."


With public transport driving acceptance in one area the Internet is also a prime force. The Microsoft .Net strategy envisages the use of smartcards for both security and identification systems while Windows 2000 already includes

smartcard drivers. Indeed, the world's leading banks have come together to form Identrus, an organisation which provides a trust hierarchy for B2B transactions. Authorised purchasers within companies can register with Identrus and get a unique identification code while vendors can similarly register.

Identrus has stated that smartcards are one of only two technologies on which it will authorise the storage of the codes for security reasons. Similarly, with a high number of Internet credit card transactions being repudiated by card holders in the US, American Express has now incorporated smartcard technology on its Blue card. The company is also giving away plug-in PC card readers to

customers to enhance Internet transaction security -- Visa is now following suit and MasterCard is understood to be not far behind.

CardBase has just launched the back office software it designed for VisaCash -- the Visa version of the electronic purse. This software will make the VisaCash card usable in any country where smart cash cards are accepted.

However, if Irish people want to experience the cash card for themselves they should visit Dublin's Blanchardstown Shopping Centre. Some 50 retailers in the centre are now accepting a National Irish Bank smart cash card and the pilot scheme, which has been running since July 4 last, has exceeded expectations.

"We are delighted with the scheme," said Michael McCormick, manager of smartcards with National Irish Bank. "Fifty retailers are accepting the cards at present and a further 12 have signed up and we are just going through the

paperwork to install the readers and so on in those outlets. We have issued 2,500 cards to shoppers and there are a further 4,500 applications being processed.

"There were some delays at the outset because we had to go through the same processes as a credit card issuer for the money laundering legislation -- this has now been speeded up. Now, if a person goes to Blanchardstown Shopping Centre

they can go up to the National Irish Bank booth and be issued with a card on the spot, they will be shown how to load money onto it in one of the loading machines in the centre and they can start spending straight away."

National Irish Bank is also in active discussions with retailers outside of the Blanchardstown Centre and hopes that its smartcards will be more widely available in the new year. However, the success of the cards in Blanchardstown may be just an isolated incident. VisaCash cards were launched as part of the Information Age Town project in Ennis last year and were less than spectacularly

successful -- unattended points of sale were really their only success, such as vending machines.

But with the clear success of Blanchardstown, the fact that the credit card companies are migrating to smartcard technology and the possibility of CIE adopting it, we might finally be getting a glimpse of the smart future which has

been predicted so often.

Barry McCall is at

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