The smart money is on smart cards

Already common in many parts of the world, experts say Canadians may soon find themselves in the midst of a smart card boom.

About the size of credit cards, smart cards are similar in look and feel to the more familiar magnetic-stripe card – a.k.a. the debit card – except for one very important element: smart cards contain an embedded microprocessor that can store and process information.

They can be used as “stored value” cards, which facilitate the transfer of small amounts of money, usually in the neighbourhood of $20 or less. Smart cards can also be used to purchase phone time, transit fares or even store information about a person to help ease the delivery of government services.

Though there is some dispute over exactly how widespread smart card use is worldwide, there is no question that Europeans – especially in France and Germany – and a number of Asian countries have embraced the technology.

North America is a different story – partly because of the success of magnetic-stripe cards, and also because for smart cards to work, they require a corresponding infrastructure. So far there has been little pressure on banks and merchants to build one.

Donna Farmer, president and CEO of the Smart Card Forum, a non-profit, Washington, D.C.-based organization that promotes smart card technology on behalf of its 195 corporate members, expects Americans will embrace smart cards, but only gradually.

“I think [people] expect smart card proliferation to be like a tidal wave, and I draw the analogy that it’s a rising tide,” she said. “In pilots, (smart cards) seem to be acting like pebbles thrown in a pond causing ripples to the outlying community.”

Currently there’s three million smart cards in use in the U.S. performing a variety of tasks, Farmer said. She points to colleges where student information is stored on cards – something that speeds up administrative tasks and even tracks students’ meal plans — as one example.

The rise of Internet-based commerce has also helped the public become more aware of the vulnerability of private – read credit – data. She expects concerns over privacy to slowly push both the public and the enterprise toward the widespread adoption of smart cards, which are virtually tamper-resistant.

That’s doubly true for Canada, said Toronto-based Richard Thomas, director of marketing and communications for Mondex Canada Association, part of an international program developing electronic cash projects in 50 countries around the world, and partly spearheaded by MasterCard International.

Last month, Mondex announced an e-cash program in Sherbrooke, Que., where consumers can use smart cards, in this case a regular bank debit card with a microchip, to pay for everything from parking meters to photocopiers. More than 500 merchants have already signed up for the e-cash infrastructure, and Thomas expects that number to grow by the end of summer, when full implementation begins.

“There is certainly a demand for this technology, once consumers understand what the advantages are they certainly see what purpose it will have in their lives,” Thomas said. “Cash transaction values primarily under $20 seems to be what consumers are using the card for, but more and more [we see it in] environments where debit and credit aren’t accepted and cash it a bit of a hassle because there might not be a chance to make change.”

Thomas expects that a “good proportion” of Canadians will carry smart cards in their purses and wallets within five years. That’s because few nations have taken to plastic-based forms of transactions like Canadians have, Thomas explained.

But adoption will come gradually, said Gordon Jenkins, a Web and emerging technology consultant based in Nepean, Ont., as Canada’s geography poses challenges for any technology that requires such a vast infrastructure rollout,

He predicts that Canadians will be using smart cards to access public phones before they use them for other goods and services. That’s because retrofitting phones to handle smart card technology is cheaper than updating ABMs, Jenkins said.