Monday, February 28, 2011

Smart Card History and Applications

What is a Smart Card, Introduction

Instead of filling your pocket with coins, imagine buying the newspaper using a card charged with "money". And this same card could be used to pay for a ride on public transportation. And after arriving at work, you could use that same card to open the security door, enter the office, and boot up your PC with your own personal configuration. In fact, everything you purchase, whether direct or via the Internet, would be made possible by the technology in this "magic" card. It may seem to be a dream, but the rapid advancements of semiconductor technologies make this type of card a reality. In some parts of the world, the "smart card" has already started to replace common cash, coins, and multiple cards. The two essential parts of the smart card system is the smart card and the card reader, which is used to exchange or transfer information.

Why is the smart card replacing the magnetic strip card?

Because the smart card can hold up to hundreds of times more content and data than a traditional magnetic strip card. The smart card is classified as an integrated circuit (IC) card. There are actually two types of IC card, memory cards and smart cards. Memory cards contain a device that allows the card to store different types of data. However, they do not have the ability to manipulate or modify this data. A typical application for memory type cards is the famous prepaid telephone card. These cards hold typically between 1 KB and 4 KB of data. So a memory card becomes a smart card with the addition of a microprocessor.

The key advantage of smart cards is that they are easy to use, reliable, and can be used in many applications. They provide benefits to both consumers and merchants in many different industries by making data portable, secured, and easy to access.

Components of a Smart Card

A smart card is a bit similar to an ordinary credit card, but it has embedded IC's (memory and micro-controller) and contacts for the IC's on one side. It may also include a magnetic strip for conventional transactions. The embedded micro-controller enables the card to make computations and decisions, and to modify data. The Figure below shows a block diagram of the smart card internal circuitry.

A typical smart card consists of an 8-bit micro-controller (MCU), 16 KB of ROM, 512 bytes of RAM, and up to 16 KB of EEP ROM or flash memory, all on a single device. There are many types of memory within the card. For temporary data storage, it contains RAM which is only used when power is applied (usually when the card is in contact with the reader).
It also contains ROM which stores fixed data and the operating system or the firmware. The use of non-volatile memory such as EEP ROM or Flash memory is ideal for storing data that changes, such as an account PIN or transaction data. This type of data must remain stored once power is removed from the card. Currently manufacturers of smart cards are moving to a 32-bit microprocessor to increase the processing power and to handle more applications.

The two types of smart card
  • Contact smart cards: These require insertion into a smart card reader.
  • Contact-less smart cards: These require only close proximity to an antenna.
The contact smart card has a small gold chip about one-half inch in diameter on the front(instead of a magnetic strip on the back like a credit card). When the card is inserted into a smart card reader, it makes contact with the electrical connectors that read information from the chip and write to the chip.
A contact-less smart card looks like a typical credit card, but it has a built-in microprocessor and an antenna coil that enables it to communicate with an external antenna. Contact-less smart cards are used when transactions must be processed quickly, as in mass-transit toll collection. The"combicard" is a single card that functions as both a contact and contact-less card.

The advantages of smart cards over traditional magnetic strip cards
  • Proven to be more reliable than the magnetic strip card.
  • Can store up to 100 times more information than the magnetic strip card.
  • Reduce tampering and counterfeiting through high security mechanisms.
  • Can be reusable.
  • Have a wide range of applications (banking, transportation, health care, etc..).
  • Are compatible with portable electronics (PCs, telephones, PDAs, etc..).
  • Can store many types of information (finger print data, credit, debit and loyalty card details, self-authorization data, access control information, etc..).

History of Smart Cards

Bull CP8 and Motorola developed the first "smart card" in 1977. It was a two-chip solution consisting of a micro-controller and a memory device. Motorola produced a single chip card called the SPOM 01.
Smart cards have taken off at a phenomenal rate in Europe by replacing traditional credit cards.The key to smart card success has been its ability to authorize transactions off-line. A smart card stores the "charge" of cash, enabling a purchase up to the amount of funds stored in the card. Motorola’s single chip solution was quickly accepted into the French banking system. It served as a means of storing the card holder's account number and personal identification numbers (PIN) as well as transaction details. By 1993 the French banking industry completely replaced all bankcards with smart cards.
In 1989 Bull CP8 licensed its smart card technology for use outside the French banking system.The technology was then incorporated into a variety of applications such as Subscriber Identification Modules (SIM cards) in GSM digital mobile phones. In 1996 the first combined modem/smart card reader was introduced. We will probably soon see the first generation of computers that read smart cards as a standard function.
In May 1996 five major computer companies (IBM, Apple, Oracle, Netscape, and Sun) proposed a standard for a “network computer” designed to interface directly with the Internet, and it has the ability to use smart cards. Also in 1996 the alliance between Hewlett Packard, Informix, and Gemplus was launched to develop and promote the use of smart cards for payment and security on all open networks.

Some examples of smart card applications besides e-commerce uses
  • Transferring favorite addresses from a PC to a network computer.
  • Downloading airline ticket and boarding pass.
  • Booking facilities and appointments via Websites.
  • Storing log-on information for using any work computer or terminal.
Smart Card Market Potential

Smart card usage worldwide is increasing at an extraordinary rate. There are already 2 billion smart card units in circulation. A leading smart card reader manufacturer (Gemplus) predicts that by 2018there will be 5 billion phone cards alone. And this does not include smart cards for medical information, personal ID, loyalty information, etc. All of these smart cards in circulation require smart card readers.

To date, Europe has dominated the smart card industry in both production and usage. The region produces as much as 90% of the world's smart cards and consumes about two thirds. However, Europe’s share of the smart card market has been declining as the cards have started gaining popularity in other parts of the world. By the end of the decade, smart card usage is expected to be evenly split Europe, the Americas, and Asia.

College campus smart cards also have been a major success in the U.S. These multi-application smart card systems provide students with services such as ID data, Parking, ATM access, Library check out, Dormitory access, Payment services at vending machines, laundry, telephones, and book stores.
The number of students carrying smart cards in the U.S. has grown to more than 1 million since1996. This represents approximately one in 17 students. The growth in campus cards is producing a generation of people who already understand the benefits of smart card technology and who may be more inclined to use them in larger, open system applications.

Smart Card Applications
  • Smart cards are being used in applications ranging from stored value cards (SVCs) to transportation, medical, and identification cards. As they become cheaper to produce,disposable smart cards will become available alongside long-term use cards, such as multifunction credit cards. The low-cost disposable smart card will become commonplace in applications such as one-day travel cards, flight tickets, and even concert tickets. Smart card applications are increasing daily in this rapidly growing area. The following list describes some of the ways smart cards are being used today.
  • Stored Value Cards (SVCs) - Also known as electronic purses, they are being championed by companies such as Mondex International (Mondex), Banksys (Proton), and Chipper International (Chipper). They allow small denominations of money to be stored on the card in various currencies. SVCs can be used for small value purchases where it is inappropriate to use a credit card. The SVC needs to be ‘charged’ with cash. As each transaction is completed, the appropriate amount is deducted until the card is empty. Some companies are producing small key-ring type readers with a small display that can read the amount left on a SVC. For example, a single card could be used as a credit card, debit card, SVC, access card, video rental card, and medical record file. Other applications for SVCs include vending machines, parking meters, pay TV, cinemas, and convenience stores.
  • Phone Cards - Public pay phones are beginning to replace the coin slot with a smart-card reader. Using smart cards to pay for calls reduces the need to carry cash and prevents theft from the phone company. This type of stored value card counts down the money spent on each call. It can then be re-charged or disposed of when it’s empty.
  • Health Care Cards - Health care cards can store pertinent medical information such as: Card holder's doctor, Blood type, Allergic reactions Medications, Next of kin, Emergency telephone numbers, Dental records, Health card details, Scheduled medical visits. This type of cards has proved to be very popular in Germany, with most of the population carrying one.
  • Transportation Cards - It is estimated that there are 20 billion commuter transactions worldwide. All these transactions take time, so the need for smart card technology is increasing, especially for contact-less transactions. For example, smart cards could drastically reduce the time it takes to pay for a subway ticket and pass through the security barrier. As you pass through a turnstile, you could hold your card next to the reader. The card would be read, funds would be Subtracted, and the entrance barrier would be opened.
  • Pre-pay Utility Meter Cards - This type of card is very popular in regions with a lot of seasonal worker movement. They are also good for short-term tenant agreements where utilities (water, electricity, and gas) must be paid for in advance or as-used. The card is "charged" with funds and then inserted into the utility card reader. Money is deducted for a certain amount of gas, electricity, or water. The meter usually shows as a countdown of how much fuel is left. This type of utility payment has proved very popular in South Africa.
  • Personal ATM - Public and private telephones and PCs with smart card readers could make personal ATMs possible. This would allow users to load funds onto their smart cards from their bank accounts. Or they could top up the limit of a pre-authorized debit card. Financial institutions can make these facilities available wherever there is a phone, without the need for costly traditional ATMs. These telephone transactions can enable funds to be transferred from person to retailer, bank to account holder, and even person to person.
The Figure below shows the current variety of smart card applications:
Sources: TDCT Handbook, Wikipedia and Various.

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