Smart Cards: A Closer Reality

As I child when I envisioned future technology, I pictured the Jetsons. Remember the flying cars, robots, moving walkways, and video phones? Some of these futuristic products are now a reality – others could be introduced in time. And, I've realized that the entertainment industry sometimes provides a sneak peak at future technologies that become part of our everyday lives.

A few years ago, a futuristic movie titled "The Fifth Element" provided a future look at the card industry. In the sci-fi tale, the stars Bruce Willis and Milla Jovovich use a "multipass," one card for all of their everyday transactions (passport, money card, driver's license, and so on). The movie's plot takes place decades from now when flying cars and space vacations are common. However, I don't think we'll have to wait that long for a "multipass" to be introduced.

Smart Cards In The U.S. Market
I've just returned from a visit with the Datacard Group (Minneapolis). While there are a number of technology companies in the card business, the Datacard Group maintains a leadership role in the market. The Datacard Group provides the largest number of card printers to companies that issue credit cards like American Express, Mastercard, and Visa.

According to Datacard President Jerry Johnson, the company is now focusing its efforts on aggressively expanding smart card technology in the United States. (Smart cards are cards that have a silicon chip that contains active data. When the smart card comes in contact with a reader/writer, data on the chip can be updated.)

Smart card technology has been available for years and is commonly used in many European countries for credit cards and phone cards. However, in the United States, smart cards have been only used in niche applications like laundry cards or medical history cards. A number of factors have kept smart cards from more widespread use in this country.

Unlike Europe, the United States has a large communications infrastructure to allow credit card transactions to take place with just the use of a telephone. A retailer needs to merely swipe the magnetic stripe on the card or type in the credit card number, and transaction software dials up a database containing information about that card. To move to smart card-based credit cards, retailers and any other company that performs credit card transactions would need to add a smart card reader/writer to their point of sale peripherals.

In addition, a year ago U.S. Attorney General Janet Reno, in an antitrust lawsuit, accused Visa and Mastercard of intentionally delaying the growth of the smart card industry.

Multiple-Application Smart Cards
The Department of Justice estimates that Visa and Mastercard account for 75% of all credit card purchases in the United States. The Department of Justice alleges that the boards of both companies jointly decided not to introduce smart cards in the late 1980s after Mastercard had widely tested the technology.

Since the antitrust lawsuit was filed, some advancements in smart cards have been made. American Express introduced its Blue card based on smart chip technology. And, Visa has finally launched a technology system for credit cards embedded with smart chips to its banking networks.

But, more importantly, the Datacard Group acquired Platform 7 this summer. Platform 7 is a software company that develops applications for the smart card industry. Working with standards organizations and other smart card companies, Datacard hopes to push the adoption of multiple-application smart cards. This will allow one card to be used for multiple uses – much like the multipass.