smart cards

This page looks at smart card systems, net-payment cards and chips.

It covers -

• introduction
• net-payment cards
• wireless cards
• bibliographies
• primers
• bodies & standards
• security

     introduction

The first electronic transaction systems for consumers were credit cards and automatic teller machine (ATM) cards based on a magnetic stripe that allowed the user to gain access to a line of credit or bank account. In essence, they authenticated a transaction over a network and the individual card did not embody a monetary value. 

By the late 1980s developers were experimenting with magnetic stripe cards that could act as "electronic wallets" or "purses". A value, typically somewhere between twenty and two hundred dollars, would be loaded onto the card - the card itself served as currency, rather than as authentication for money held in a separate account.

The relentless fall in the cost of microchips encouraged some developers to add them to cards. The expectation is that these stored value cards (Smart Card) would serve as both an access device - eg linked to your account as an ATM card - and a self contained store of value. 

Some reports suggest a figure of around 2 billion smart cards issued each year, of which 80% relate to phones and 20% cover uses such as finance, pay television and personal identification. Most German citizens have a health care smart card.

     net-payment cards

Claims that B2C trading has been impeded by consumer suspicion about the security of online payments or merely restriction of credit cards to consumers older than 17 years have been reflected in a succession of surrogate payment schemes.

Some have sought to tie payments to mobile phone accounts, particularly for micro- and nano-payments.

Others have promoted special net-payment cards for transactions by consumers under 18.

The UK Ingotz scheme, launched in 2003, involves a 16 digit plastic card. Parents periodically transfer money into the account associated with the card and, it is claimed, are able to block use of the card for particular services or commodities. Payments are made from the account, so that credit card details are not disclosed. Payments can, however, only be made to a small number of retailers - a problem that has stymied the alternative digital currencies discussed later in this guide.

UK competitor SplashPlastic involves the consumer purchasing a card from a retailer, with online transactions identified by that card's number. Its use is restricted to participating merchants.

The schemes are reminiscent of mobile phone-based payment systems trialled unsuccessfully in the EU, Canada, US and Australia, eg the EU PayBox and FastPay schemes.

Typically the consumer provided a restaurant or other retailer with a mobile phone number and a personal identification number. The retailer billed the mobile phone operator, with a charge appearing on the consumer's account in the next month or next quarter. customers to send and receive payments quickly and securely, via email or mobile phone, any time day or night. Fastpay appears to have emphasised interpersonal payments (underpinned by a per transaction rather than annual £14.99 fee).

The sender simply requires the email address or mobile phone number of the person they are sending money to, who will then instantly receive an email or SMS, telling them that they have been sent a FastPay payment and to visit www.fastpay.com to collect it. Recipients do not need to be registered to receive payments and do not need to be NatWest customers. Money can be paid into a FastPay account from a debit card, credit card or bank account via direct debit.

     wireless cards

Some enthusiasts, such as Applied Digital Solution' Scott Silverman, have suggested that biometric-based authentication schemes are unecessary, as it feasible to use the VeriChip (a subdermal RFID microchip) as the basis of payment systems rather than merely to tag puppies, kittens and children.

The payment chip (or chips, since operation of the Australian domestic pet identification regime has been complicated by competing registries with incompatible chips) would be implanted in the body of the owner, broadcasting information to a scanner when interrogated by a reader.

Claims that consumers could avoid swiping transaction cards by parking the card's equivalent under their skin seem unlikely to come to fruition, given geospatial privacy regulatory concerns and consumer anxiety about potential misuse of geolocation technologies. We assume that chipping will not be a hit with religious groups that regard SSNs or barcodes as "the mark of the Beast".

     bibliographies

We are in the process of adding pointers to digital cash, smart cards and online payment systems. For the moment an excellent introduction is provided by the electronic money bibliography at Exeter University.  

     primers

Among the slew of books and articles about new currency systems - we sometimes think more money's being made from publishing than from doing - Digital Money (New York: Wiley 1996) by Cybercash chairman Daniel Lynch & Leslie Lundquist provides an excellent introduction to digital money products and associated issues such as authentication, cryptography and ecommerce standards. 

Seth Godin's Presenting Digital Cash (Indianapolis: Sams.net Publishing 1995) is somewhat dated. For a less evangelistic analysis consult Leo Van Hove's paper on Electronic Purses: (Which) Way To Go? 

NetCheque, NetCash, and the Characteristics of Internet Payment Services is a perceptive article by B Clifford Neuman & Gennady Medvinsky from the 1995 Journal of Electronic Publishing.

     bodies and standards

The US Smart Card Forum is an industry body concerned with credit card sized devices that act as rechargeable electronic purses and, in more sophisticated versions, can hold digital signatures, medical records and other data. The competing Smart Card Association (SCIA) has a wider ambit.

The UK-based Mondex has attracted a number of Australian partners, although so far with uncertain success. Two studies are David Jones' 1997 Mondex: A House of Smart-Cards? paper and Felix Stalder's 1998) Exploring Policy Issues of Electronic Cash: The Mondex Case paper.

     security

The security of smart card schemes is discussed in the Security & Infocrime guide elsewhere on this site

The profile on Surveillance & Identification highlights research such as the analysis by Bruce Schneier & Adam Shostack on controls and benefits.




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