Understanding Smart Cards

Highlights

  • Store several hundred times more info than magnetic striped cards.
  • Can act like memory devices or processors when embedded with IC chip or microprocessor, respectively.
  • Governed by two standards–hardware & applications. 

Unlike credit cards, smart cards are plastic cards withelectronic microchip embedded in them. The chip stores immense amount of dataand can be processed either online or offline. Smart cards can store severalhundred times more data than a magnetic striped card. While smart cards used forapplication in sectors like transport, social security, identification, health,etc., generally store information on the users, those used in the financialsector are basically debit cards. A monetary value is stored in the card inelectronic form and the value is deducted from the card at the time of buyingproducts and services.

It functions as a memory device when embedded with an IC.When embedded with microprocessors it can function as a processor, carrying outmultiple functions such as encryption, advanced security mechanism, dataprocessing and calculations. Most stored-value cards (debit cards) are processorcards.

They can be divided into two categories–contact andcontact-less. The former has to be inserted into smart card reader/terminal fordata transfer/access. The latter does not need a physical contact with thereader. It is just held near a reader. Contact-less cards are classified basedon the distance from which they can be read. Electromagnetic signal emitted bythe reader facilitates data access.

Security-wise smart cards are a far cry from magnetic stripedcards. It is because smart cards incorporate encryption and authenticationtechnologies that can implement issuer’s and user’s requirements for thehighest degree of security. Contents and data can be securely transferred viawired and wireless networks.

Card Manufacturers

A smart card begins with a micro-controller. This IC chip isattached to an electronic module by inserting into a cavity on the module. Then,terminals between the chip and the electronic module are interconnected.Finally, the chip-embedded electronic module is glued to a plastic card.

Card Terminals & Readers

There are readers and terminals, which read these cards.These can be wireless and networked or standalone hand-held devices. Merchantshave POS terminals with connectors that provide power to the microchips. Oncecommunication begins the terminal is able to debit the chip. New devices similarto a floppy disk allow smart cards to be read by PC disk drive.

Region-wise Share of Usage (%)

Region

1996

2000

North America

3

12

South America

11

10

Western Europe

70

40

Asia

10

30

Rest of World

6

8

Interface Between Card and Terminal (API)

An interoperable and multi-platform Application ProgrammingInterface (API) is critical for smart cards to carry out diverse functions. Openstandards such as Java smart card API provides one of several proposedinterfaces. Java Card API offers a development tool for flexible, multi-platformapplications–Write Once, Run Anywhere–for devices like network computers,Web TV, smart phones and other consumer appliances. Schlumberger, for example,has introduced EasyFlex and FastOS based on Java API.

Standards

Application standards: Application-centredstandards are developed to resolve communications and data exchange conflictsbetween the cards and the institutions, which process the data. By limiting tospecific solutions, these standards often include both hardware and applicationstandards. Some such standards are electronic purse standards (CEN, Mondex orEMV), payment standards such as Secure Electronic Transaction (SET) orChip-Secure Electronic Transaction (C-SET) and European ETSI standards whichprovide a basic framework under Global Services for Mobiles (GSM) based onSubscriber Identification Module.

Worldwide Smart Card Applications in Different Areas

(*figures in millions)

Card Application

1996*

2000*

Average Annual Growth (%)

Pay Phone

605

1,500

29

GSM

20

45

25

Health Care

70

120

14

Banking

40

250

105

Identity/Access

20

300

280

Transportation

15

200

247

Pay TV

15

75

80

Gaming

5

200

780

Metering/Vending

10

80

140

Retail/Loyalty

5

75

280

Hardware standards: ISO 7816 lays out physicalcharacteristics of cards and contacts, transmission protocols, inter-industrycommands for interchange and rules for applications and data elements. ISO 10536specifies similar characteristics for contact-less cards.

Applications

There are a number of applications for smart card technology.Some of the possible areas are:

  • Retail–customers can pay for products, record purchases and take advantage of loyalty programmes.

  • Electronic purse–these are debit cards.

  • Government services–smart card can be used where a state office transfers a set of benefits like subsidized ration into card thereby reducing fraud and eliminating the printing and distribution costs.

  • Public transportation–stored-value smart cards can be used for collection of fare for trains, buses and taxis.

  • Telecom–payphones, and cellular phones.

  • Access control/ID cards–a secure way for employees to access company buildings.

  • Health care/medical–it can store the medical history of a person.

Ravi Sekhar Pandey

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