Posted: 02/1998

By Jennifer Knapp

What are smart cards? Who benefits from the technology and where is the money to be
made? These are the questions more easily answered than the question, Why smart cards?

Service–The Simple Answer

Smart cards, credit card-shaped data carriers with thumbnail-sized central processing
units, memory and storage, have teamed up with the telephone to make services available to
consumers. According to Linda Hughes, Nortel’s senior manager of North American marketing,
Millennium, "What you are seeing in the evolution of smart cards is the evolution of
a technology that will be driven by choice, convenience and need."

Consumers want a choice? Okay, they’ve got it. How about a card you stick in your
phone, and on that card are programs you can activate through a visual interface? These
programs can activate services with banks or, perhaps, ticket agencies or airlines.
According to Philippe Martineau, director of Telecom Business Division, Americas, for
Gemplus, California-based CellNet Data Systems and Barklay Bank took advantage of Gemplus’
subscriber identity module (SIM) toolkit to offer value-added services through a SIM card
and a phone. CellNet’s smart card application coupled with Barklay’s computer system gives
its payphone users and wireless subscribers the choice of account access, fund transfers
or any other automatic banking option.

Convenience

What about convenience, you ask? Well, our readers might remember the peek PHONE+
had of the Florida State University (FSU) smart card platform (September 1997, pg.108).
The myriad services that FSU’s platform already offers apparently was not convenient
enough for its users. As a result, Martineau explains, PhoneTel Communications Inc., a
Florida-based network operator, is running a trial on FSU’s smart card platform that uses
Motorola global systems for mobile (GSM) handsets, which Motorola donated to the
university. When their smart card identification cards are plugged into the handset,
students are able to reload their electronic purses for use in bookstores or cafeterias
without having to locate a point-of-sale device.

At the heart of this convenient service option is over-the-air (OTA) smart card
technology. While over-the-air sounds almost magical, it takes a lot of human brain power
to make it happen. According to Paoli, Pa.-based ORGA Card Systems, its OTA Express
gateway system has a database that receives and coordinates update requests from a billing
and customer care system. OTA Express then creates the SIM vendor-specific coded message
and forwards it to the short message service center for delivery to the SIM. Examined from
that angle, OTA might not seem so convenient, but if consumers want the option, then
technology must follow.

Beyond Wireless

There is a sense in the industry that smart cards are hiding behind the wireless mask.
It cannot go unnoticed, however, that companies such as Mississauga, Ontario-based Nortel
and the Schlumberger Electronic Transactions Division of Schlumberger, Ltd., Moorestown,
N.J., are doing everything in their power to get smart card-accepting payphones out into
the consumer world.

"In North America alone there are more than 140,000 Millenniums deployed,"
says Hughes about Nortel’s smart card-accepting payphone. But Nortel cannot do it all
alone. Rich Peck, director of telecom marketing and sales, North America for Schlumberger
says, "Schlumberger has more than 200,000 smart card payphones worldwide, and we
deployed 30,000 this year just to Mexico. We’re watching North America very
carefully."

Irving, Texas-based GTE Network Services also has taken the opportunity to lend a
helping hand. Hughes says that GTE and Nortel have arranged Nortel’s first Millennium
sales agency agreement whereby GTE can represent Millennium to other payphone service
providers.

One Bill

Of course, just because the technology is becoming available does not necessarily mean
everyone’s applications and networks are going to play nice together. In a joint marketing
plan, Martineau says one bank and one network operator in Sweden agreed to make their SIM
cards work on both the network operator side and the banking application side. They
advertised a joint platform with which subscribers to the wireless service get banking and
phone services on one bill. It will take far more than one bank and one operator agreeing
in Sweden, however, to make a global smart card system work.

"On one bill" seems the most likely answer to the question, "Why smart
cards?" Peck points out that smart card technology took a flip-flop so the SIM is no
longer the slave to the handset; instead, the chip now contains a new layer of
intelligence, known as Phase2+.

Phase2+’s extra memory and application space should seem quite valuable to anyone who
has a service to provide in a global arena. But companies need to work side-by-side and be
interoperable or the whole convenience-on-a-global-scale issue might go right out the
window.

The Global Chip Card Alliance* (GCA), however, is making a push for interoperability.
The GCA announced its intentions to institute a service mark plan to recognize
GCA-approved smart cards and terminals. Marked cards will fulfill a strict global
interoperability requirement to ensure service and protection levels worldwide.

This kind of service mark did wonders for the automatic teller machine (ATM) industry:
ATM cards bearing a particular branch or network emblem ensured that cash would be
available at a machine with a matching emblem.

"When did everyone start using ATM cards?" Hughes asks. "It was when it
was easy."

Easy is what MondexUSA is touting in its electronic cash (e-cash) launch in Guelph,
Ontario. Participants in the launch can download e-cash to a Mondex smart card over a
Nortel Vista 360 residential screen phone (a.k.a., PowerTouch 360), a Millennium phone, or
through ATMs. The Mondex smart card platform was made readily available with the help of
Bell Canada, which deployed 250 Millennium phones and 2,500 Vista 360s in Guelph. And,
because the chip’s memory holds the e-cash on the card, the need for phone authorizations
and personal identification number codes are eliminated, thus potentially making
consumers’ lives easier.

I Remeber When

As global interoperability and availability of smart cards take hold, we all will to be
able to play the game of "remember when" with smart cards, just like we do with
ATMs, computers and the Internet. Smart cards and telephones will bring a broad range of
services to consumers’ fingertips, but it will be up to all telecom players to identify
and act on the need for increased air time, one-stop billing services and advanced
software and hardware technology before smart cards secure a place in every American’s
wallet.

*The Global Chip Card Alliance members include: PTT Telecom Netherlands, US WEST
Communications, GTE Telephone Operations, Bell Canada, Telekom Malaysia, Deutsche Telkom,
American Express, Microsoft, IBM, Telstra, Northern Telecom, Landis & Gyr, Gemplus,
SPT Telecom and Elcotel.