Originally created 12/18/00

Smart cards popular in Europe



LONDON -- At Nottingham University, students buying books, newspapers or lunch, checking out books, entering buildings or even voting in campus elections use smart cards.

"I don't come to campus with money anymore. The card is much more convenient," says Giles Gale, 21, a third-year student of economics at Nottingham. "I use it all the time I'm on campus."

The plastic cards with embedded memory chips have made serious inroads in Europe.

They are used by 70 million Germans for health insurance identification purposes. In different configurations, they are also widely deployed - particularly in Britain and France - to decipher encrypted television signals.

"Smart cards are one of the fastest growing industries," said Chris Mylonas, commercial director for NDS, which has shipped 80 million cards for use in set top boxes to decode signals for subscription channels.

"To upgrade the service, you can recall the cards rather than the box," Mylonas said.

The killer application in Europe may well be the electronic purse, which allows users to make small cash purchases with debit cards. For larger purchases, smart cards make it easier for banks to verify identification.

For the online British bank Egg, "the vision was that the smart card would give customers increased financial control," said spokesman Andy Thompson.

Egg, launched by Prudential PLC last year, has issued 100,000 Visa smart cards with upgradeable onboard chips that are currently used as debit cards. Said Thompson: "The prime benefit of this card is to protect the bank from fraud," allowing it to pass savings along to the client.

"For everyone, the attractions are security, ease of use and convenience," said Dominique Hautain, executive vice president of Proton International, a Belgian company in the Visa camp.

Proton and its allies have issued some 60 million smart cards in 24 countries around the world. And they are planning large-scale testing next year of a follow-on technology, using a new global standard - the Common Electronic Purse Specification.

Competitor Mastercard has gone another technological route, in a consortium called Mondex International Ltd., which is the version used at Nottingham University.

Mondex, controlled by Mastercard, involves 26 banks around the world.

A third system, Geldcart, was issued to millions of German citizens but the cards are rarely used by the privacy-conscious Germans.

The main difference between the Visa and Mastercard systems is that Visa and CEPS allow banks to account centrally for every transaction.

With Mondex, the money is actually held on the card as digital data - stored value. It can be transferred from one person to another but not tracked.

"We do not believe that central accounting is economical," said Mike Young, director of e-market strategy for Mondex. But he acknowledged that, in the future, "a compromise, a middle ground, might be found."

The more widely smart cards are embraced, the more competitors can be expected to look to the mutual benefit offered by interoperability.

Onboard memory has increased to 32 kilobytes in more advanced cards, allowing for more complex operating systems and for partitioning of circuits that enables a number of tasks, such as maintaining loyalty accounts, the tack taken by the British drugstore chain Boots.

More simple versions of the cards - with the e-purse function - have been a boon for merchants in Strasbourg, France, on the German border, said Jean-Pierre Pradines, head of smart card marketing at the Credit Mutuel bank, part of the Mondex camp.

Shopkeepers straddling the frontier have smart card readers to handle transactions so they "do not have to handle a lot of change from different countries. They are not robbed. Cash is not stolen by employees. And it is cleaner" for food shops, where employees must wash their hands after handling change, Pradines said.

It's particularly useful for residents who ride city buses across town into Germany, where they can use cards to shop in euros, the single European currency, rather than converting French francs into German marks.

When the 11 countries that have adopted the euro do away with national currencies in 2002, smart cards may get an even bigger boost.

Globally, the growth "impetus is really coming from Europe, because of the euro," said Colin Baptie, of Visa in San Francisco. "They want to get something up and running before the euro comes in."

On the Net:

Visa: http://www.visa.com/nt/chip/main.html

Mondex: http://www.mondexinternational.com

Proton: http://www.banksys.be/eng/index.html

Common Electronic Purse Specifications: http://www.cepsco.com/