Smart cards are here finally!

Rahul Gupta

MUMBAI: Smart Cards may finally be coming into their own in India. It's

surely been a long wait. Ever since the mid-'90s, the payments industry has

predicted that smart cards would be the next big thing. With their embedded

electronic chips, they would overtake standard credit cards with magnetic

stripes for purchases and provide greater security for enterprises concerned

about making sure only authorized employees could gain access to computers and

offices. While smart cards have achieved a large market share in Europe, they

have yet to reach mass adoption in this country.

Unfazed by the slow commercial adoption of smart cards, makers of the

authentication technology are stepping up efforts to deliver development tools

and improved ease-of-use features to assuage users' skepticism and help convince

smart-card manufacturers to lower their prices.

While India has lagged behind the rest of the world in smart-card adoption,

the gaping need for online security and the development of multiple-use cards is

finally stacking the deck in smart cards' favor.

Smart cards have seen significant acceptance in Europe and US, but the Indian

market for such systems languished compared with efforts of overseas neighbors.

Smart card technology in India has only progressed as far as market trials.

However, changes may be on the horizon, according to analysts, users, and

vendors around the country. Presently there are three leading Smart Card

solution providers in India, which include Gemplus, iSmart and Schlumberger Sema.

The Indian Smart Card industry is growing at 45 percent per annum. The Smart

Card business potential of India is expected to reach eight million users by

year 2003. The requirement of Smart Cards as an ID card, combined municipal card

is expected to be 600 million by the year 2005.

According to Frost and Sullivan, the Indian Smart Card market could swell to

three million by 2005. India has been perceived as very slow in adopting Smart

Cards due to few guidelines and emerging standards.

Presently, the government, public and private sector units and some colleges

have rolled out Smart Cards in India. The Road Transport organizations in

Gujarat, Rajasthan and Chandigarh have started issuing Driving licenses,

Registration Certificates and Permits on Smart Cards. The Kerala government has

recently used Smart Ration Card. Smart Cards for government employees and labor

in Goa will be issued soon. Also Delhi's Traffic Police is planning to introduce

Smart Card driving license very soon.

In Public and Private Sector Units, BPCL Petro card and Indian Oil Petro Card

is on Smart Cards. Also State Bank of India's e-cash scheme is based on Smart

Card.

Since Smart Card technology is getting acceptance, agencies are keen to

deploy them. Rajasthan milk card project, the world's first milk collection

point is based on Smart Card. Also Mother Dairy milk distribution project is

based on Smart Cards.

Soon Metro Railway, Kolkata is going to issue smart season tickets instead of

magnetic strip cards. Brihanmumbai Electric Supply and Transport (BEST) has

decided to introduce contactless cards for ticketing across its entire network.

BEST has already introduced Smart Cards for Automative fare collection.

The demand for Smart Cards in Health Care and Transportation sectors is

expected to reach 350 million by year 2005. Employee's Provident Fund soon to

issue Smart Cards for its 2.6 crore subscribers which would be accessed through

its 267 offices.

Several forces are converging to drive smart-card deployment in India. These

include multiapplication card development, card operation standards, lower

prices, new card marketing methods, and more attention from industry giants such

as IBM and Microsoft.

Simon Lang, Head, Smart Cards Solutions Center, iSmart, said, "The

market is evolving from simple to more sophisticated cards. We are at the dawn

of the multiapplication smart-card era right now. The use of smart cards with

companies for identification, for security, and for Internet commerce is

something that will drive the Indian market for smart cards."

Although the Indian market has been slow to deploy them -- mainly using them

in trials -- smart cards offer many benefits. The challenge to make smart-card

technology accepted is that all the pieces of the technology must be available

and affordable

The driver of smart-card adoption is going to be a combination of firms,

including the computer software vendors, ISPs, and firms that are wishing to

perform commerce across the Internet, like banks, credit card companies, and

organizations.

Despite the touted advantages of Smart Cards, several barriers are preventing

widespread adoption of the technology in India. One of the greatest concerns for

businesses and consumers is privacy, industry experts say. The prevailing myth

is that if all of your information is on a card and you drop it in the street,

anyone who picks it up will know everything about you.

Smart Cards could be used for storing credits such as pay telephone cards and

photocopier cards used at some educational institutions, as well as for ID

purposes and other applications in the transportation, retail and government

markets. They are an effective business tool that will give early adopters a

competitive advantage.

Gemplus (I) Pvt. Ltd., managing director Vijay Parthasrathy said, "One

cannot think in terms of, 'I'm a bank, therefore I will issue bank cards, I'm a

retailer so I will issue retail cards, or I'm a telco so I'm interested in

pre-paid phone cards.'"

Instead, he said, different organizations - such as universities and banks -

can share the smart card infrastructure costs. Although partnerships are the way

of the future, all current systems - including operating systems - are

proprietary and a worldwide standard remains elusive.

Smart cards are plastic cards that resemble credit cards, but which include

an embedded chip to store and process information, initially for use in Internet

commerce and network security.

Smart cards can help with shopping on the Internet. Merchants can allow you

to download coupons from the Internet. If you use a smart card to access an

account on the Internet, you not only can make payments, but the card is a

secure database. You can download rebate coupons and advertisements. When you

show up in the store, you will get the coupon applied to the purchase. It could

also be loyalty points for shopping at a given retailer.

Smart cards could also find their way into mobile phones, as they have in

Europe. In Europe, the uptake has been better because the GSM (global services

for mobile communications) network depends on having a card in the back of the

phone. If you buy a GSM mobile phone, you buy a phone with a chip in it. It

carries the subscriber information, such as the credentials for interacting with

a bank.

The credit card industry in India has the online infrastructure to

authenticate cardholders while the transaction is taking place. But with smart

cards, the chip allows credit card companies to protect themselves and their

cardholders against criminals skimming a magnetic stripe card and making a copy

of it to manufacture fraudulent credit cards.

Smart cards are also in place at many companies to authenticate users and

allow access to the corporate network. Anybody who has used an ATM machine is

trained to use a smart-card authentication process.

When the user inserts their card into the reader, they enter their PIN. When

they remove their card, the computer locks up, and they can go to lunch rather

than going through a formal log-off process.

Whether they're providing security in enterprises or enabling authenticated

transactions over the Internet and in stores, smart cards will be showing up in

greater quantities, storing more personal information in a portable format.

Smart cards can carry other information besides payment authentication. They

can store a personal biometric fingerprint or iris scan to authenticate a

cardholder's identity. With proposals for national ID cards gaining support

these days, smart cards could find their way into every citizen's wallet.