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SMART CARD TECHNOLOGY.
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Discusses the adoption of smart cards in the United States.... More...
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Paper Abstract:
Discusses the adoption of smart cards in the United States. Description of the technology of digital money types including icons and special software, computer chips. Applications of electronic banking. Competitive strategies in the marketing of smart cards. Security issues involving their use. History of smart card use in Europe and Asia. Two Figures.
Paper Introduction:
SMART CARDS: THE TECHNOLOGY, ITS ADOPTION, COMPETITION IN MARKETING SMART CARDS, AND SECURITY
Introduction
This research examines smart card technology, the adoption smart card technology by transaction card issuers in the United States, competitive strategies in the marketing of smart cards, and security issues involving the use of smart cards. One focus of this research is on the adoption of smart card technology in the United States, as opposed to the introduction of the technology, because the introduction of smart card technology in the United States occurred several years ago. The acceptance of smart cards by consumers and businesses in the United States, however, has been a slow process. The widespread use and general acceptance of smart cards in Europe contrast sharply wit
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As indicated in the preceding discussion, the most significant successcriterion for e-commerce is the security of transactions. J., Ruble, C. In fact, however, electronic banking was initiated in 1871 with themoney transfer service provided by Western Union in the United States.Western Union's money transfer service continues in 2 1. Producersand retailers are motivated more by the strategic implications of brandequity. The Royal Bank of Canada and the Canadian Imperial Bank of Commerceintroduced smart cards (the Mondex system) in Canada - the first banks tooffer smart cards in North America. The drawback to these cards is acquisition cost for theissuer. Electronic Engineering News, 52-53. Digital money: Electroniccash may make sense. (1995 Fall). In the smart card test in Manhattan, the smart cards functionedas a debit card/ATM combination rather than as the more sophisticatedMondex cards used in the United Kingdom and Canada ("Cold, Hard Cash on aPlastic 'Smart Card,'" 1997). To useit, a consumer merely slides the smart card into a slot in a interfacesmall unit at a merchant, and the virtual cash transfers from the smartcard to the merchant's smart card collection device through a chip-to-chiptransfer (Peterson, 1997). Smart cards are being used in American corporations to control accessto sensitive computers. Bank Systems + Technology,38(1 ), 9-1 . Electronic Engineering Times, 41-42. The phones can convey data from the Mondexcards to other such smart cards and to or from banks (Woods, 1995). The smart cards also can store data such asfrequent flyer points. When a consumer-transaction card system is to have along operational life, the design needs to be adaptable to changingconsumer needs and marketing objectives. The major smart card technology is the Mondex card developed inthe United Kingdom. Masters, L. Australian Banking &Finance, 1 (19), 14. The associationof German banks believes that such security will be provided by the use ofthe digital signature ""Banks Become E-Business Market Places," 1999). It offers an Internet based payment servicecalled "The Secure Internet Payment System." This system consists ofCredit Card Service, CyberCheck, and CyberCoin, which correspond to creditcard substitution, check substitution, and cash substitution systems,respectively. Customers initially open a dummy account called CyberCash Account andreceive CyberCoin from their savings account. The chip/optical smart card provides the data memory capacity,versatility, and upgradability that transaction-function that earlier ICchip cards lacked. EDI technology provides a basis for more innovations incommercial banking in United States. Because smart card money transfers from user bankaccounts are infrequent in contrast to settlement transactions, the totalfees paid for smart card use tend to be much lower that debit card fees.The transactions involving the payment of merchants with smart cards incurno bank fees. SwedishUtimaco Safeware introduced a new smart card-based security technology forauthentication, encryption, and digital signatures that uses a biometrickey. Importantly, the second strongestdriver for consumer acceptance in the Pacific nations is security. The card was usable at Jaguars home gamesto buy products from concession stands. Providian Financial. (1999). Refuses to accept alternative brands of the product. Instead, themoney downloaded to a smart card becomes the equivalent of cash. Hansell, S. Smart Card Technology Several types of digital money have been developed or proposed. The multi-function,combined-technology card featured a standard integrated circuit (IC) chipon one side of the card and more than one megabyte of read/write opticaldata storage on the other side - all within the standard credit card size("Drexler Technology Unveils Multi-function Chip/Optical Smart Card asParis Card Technology Show," 1994). 7).A study conducted by Cobb-Walgren, Ruble, and Donthau (1995) found thatbrand equity was in part a function of brand loyalty, and that, in turn,brand loyalty could be influenced by advertising. V. (1994, November 2). (2 1, October 31). Promotions of smart cards contend that use of the smart cards savesconsumers money in comparison to the use of popular debit cards. (1997, January 2 ). The consumer name of the technology isthe cyber-cash system. The Adoption of Smart Cards In 1995, in Swindon, England, approximately 4 , banking customersbegan using Mondex cards, which resemble in appearance the more familiarATM (automatic teller machine) cards, but which have built-in sophisticatedcomputer chips. A., & Donthu, N. What is new inthe contemporary period are the innovations in electronic banking that arebeing spurred by developments in information technology (IT), i.e.,software, and computerization, i.e., hardware. Brand loyalty creates or contributes to the creation of many benefitsfor marketing organizations. Smart card acceptance is increasing in the UnitedStates as security protocols for the smart cards improve. A brand is a "name, term, sign, symbol, design, or some combinationthat identifies the products of a firm" (Masters, 1997, p. When a consumer purchases goods or services, one transfers CyberCoin(money) either with a smart card or over the Internet to the softwarecalled CyberCash Merchant Cash Register on the retailer's computer.Implementation of the actual settlement is by funds transfer from thecustomer's bank account to the retailer's bank account through the existingbank network after the transfer of unit of prepayment is completed. Retrieved from the Internet 2 1-12- 4 at:http://www.bankenverband.de/nla. The major deterrent to wider use of smart cards in the United Statesis security. Smart cards quickly became an integral part of theelectronic-commerce (e-commerce) strategies of Canadian banks. The new security method allows smart card users to unlock smart cardswith a fingerprint. The check substitution and cash substitution systems rely onthe use of smart cards. Futurist, 32, 4-9. Nevertheless, smartcards protected by this cryptographic technology are vulnerable to someextent. The smart card equipped with this technology can beused for authentication, single-sign-on, encryption, or digital signatures("Swedish Security Provider Utimaco Safeware," 2 1). Cold, hard cash on a plastic "smart card." (1997, April 22).Maclean's, 1 9, 41. Developing and managing brands and products.Hayward, California: Department of Marketing & Entrepreneurship, CaliforniaState University Hayward. In Germany, the federal association banks reports that commercialbanks have adjusted well to the technological opportunities of the newinformation society and will in the future become e-commerce market places. Business Wire, 11 2 43. Thedigital money types including the following: > Icons (electronic tokens) stored on a computer's hard drive and transmitted over the Internet using a modem and special software > Monetary value loaded onto smart cards with embedded microprocessors for recording transactions and calculating changes in value, and > Hybrid versions that allow digital money to be uploaded from smart cards to a personal computer or downloaded from the computer to a smart card for greater portability (Coates & Bonorris, 1998). These cards have computer chipsthat contain a vast array of information about the cardholder and her orhis finances. The widespread use and general acceptance of smart cards inEurope contrast sharply with the situation in the United States (Hansell,2 1). A major innovation in electronic banking at the beginning of the 199 swas the introduction of electronic data interchange (EDI). Each Mondex customer receives gets smallreader that displays balances (bank account and smart card) or atransaction log (Woods, 1995). Thecustomer then installs the free software CyberCash Consumer Wallet on heror his computer; thereby activating CyberCoin. If the preferredbrand is not available at the time of purchase, however, the consumer willselect an alternative brand. Costto consumers for a Mondex card and balance reader ranged from C$1.25 andC$3 per month. In another non-financialapplication of smart card technology, the Department of Defense in theUnited States issues smart cards to all personnel with an objective ofincluding all relevant personnel information on an individual's smart card(Jackson, 2 1). The most important of these benefits is brandequity. References Banks become e-business market places. It is technologically possible to force a card to make acalculation error in the encryption process. (2 1, October). (2 1, February 22).Computer Weekly, 32. c. In the United Kingdom, transaction card issuers are introducing 32-bitsmart cards to make the smart cards even more attractive to consumers(Edwards, 2 1). Figure 1 [pic] In initial introduction of smart cards in the United States in 1996,Chase Manhattan and Citicorp conducted a joint test of the Mondex card inManhattan. Brand equity provides a strong platform for introducing newproducts and insulates the brand against competitive attacks. Brand insistence describes the stage of consumer awarenesswherein a person has developed a bond with and a dependency on a productbrand to an extent that the person: a. These perceptions result from marketing activities.The challenge for a marketer is to present the brand in such a way as tocapture the consumer by creating strong brand awareness and brand loyalty.The bond between brand and consumer begins with identity. (1998, August). Comparing actions andoutcomes of this induced error process provides information that allowshackers to break the cryptosystem protecting smart cards (Peterson, 1997). Brandloyalty refers to the extent to which consumers seek a specific brand of aproduct as a part of their purchasing behavior (Masters, 1997). 3. The use of an opticalmemory stripe plus a small memory chip instead of an expensive, largermemory chip minimizes the cost of the card ("Drexler Technology UnveilsMulti-function Chip/Optical Smart Card as Paris Card Technology Show,"1994). Hackers are successfully gaining access to thesystems of card issuers to obtain information that lets them createcounterfeit smart cards ("Police Swoop on Smart Cards Piracy, Nets 6Hackers" 2 1). Brand equity means different things when viewed from the perspectiveof the investor, the producer, the retailer, or the consumer. Brand preference describes the stage of consumer awarenesswherein a person has had prior satisfactory experience with a productbrand, and will select that brand over competing brands of the product ifthe preferred brand is available at the time of purchase. Edwards, C. Security gets smarter. The so-called smart cards - the fourth and fifth generation creditcards - likely are the wave of the future. Summary This research examined smart card technology, the adoption smart cardtechnology by transaction card issuers in the United States, competitivestrategies in the marketing of smart cards, and security issues involvingthe use of smart cards. b. Science News, 151(5),78-79). 32-bitters serve up Java, crypto forsmart cards. (2 1, September 3 ).Australian Banking & Finance, 1 (7), 6-7. Brandequity, brand preference, and purchase intent. Cobb-Walgren, C. Swedish security provider Utimaco Safeware. Ready or not, DOD rolls out smart cards.Government Computer News, 2 (9), 1-2. Drexler Technology unveils multi-function chip/optical smart card atParis card technology show. By including an inexpensiveread/write optical memory stripe in the design, it is possible to add anumber of functions as demanded by market needs. Customers with actual money in their bank accounts can get theelectronic money transferred onto their cards by telephone. CyberCoin has thecharacteristic of a unit of prepayment, which is similar to VISA Cash. U.S. Woods, W. These classificationlevels are as follows (Masters, 1997): 1. Retrieved from the Internet 2 1-12- 4 at:http:// www.sbe.csuhayward. CyberCash began Credit Card Services in 1995 andstarted CyberCoin smart card services in 1996. Japanese banks introduced a smart card system designed to provideconsumers access to cash in their bank accounts and to facilitateelectronic payment transactions. Coates, V., & Bonorris, S. Activation of the 1 .4-inch touch-screen (TFT active-matrix)can be by either finger or electronic pen ("British Try Bus Cards," 1996). (1995, June 12). The primary driver of consumer acceptance of smart cards inthe Pacific nations is convenience. Maclean's, 11 , 48-49. Thisservice uses the existing bank network system and does not require theopening of a new account at a specified bank. Brand loyalty is measured at three classification levels-brandrecognition, brand preference, and brand insistence. Smart cards get even smarter.Information Week, 34. In Australia and other Pacific nations, more than 8 percent ofconsumers rely on the use of smart cards ("Consumers Give Thumbs-Up toSmart Cards," 2 1). A small wireless device referred to as a wallet (an electronictracker) can transfer money from one card to another - from shopper tomerchant or between individuals. Cataldo, A., & Kallendar, P. The emergence of a new security threat, however, poses problems forthe issuers of smart cards. This risk is similar to that posed by counterfeit creditcards with the exception that counterfeit smart cards conceivable canprovide criminals with access to individual bank accounts and personalinformation. Chinks in the digital armor:Exploiting faults to break smart-card cryptosystems. 2. InfoWorld, 22(45), 37-38. Jackson, W. Thesestrategies are particularly important as banking consolidations continue inthe United States. Security Issues Involving Smart Cards Unlike debit cards, the introduction of which occurred in the early-199 s and are in wide use in the United States, smart cards do not requireconsumers to enter personal identification (PIN) numbers. The campaign targeted 26, Jaguarsseason ticket holder households. The chips contain real, but electronic, money in the formof data. Figure 2 [pic] In another early and limited application of the smart card in theUnited States, First Union National Bank of Florida initiated a direct-mailcampaign for its stored-value smart card for the then expansionJacksonville Jaguars football team. Visa and MasterCardin the United States are incorporating facial recognition technology intosmart cards to provide enhanced security ("Security gets Smarter," 2 1).Some smart card issuers also are incorporating fingerprint technology intothe security systems for smart cards (Cataldo & Kallendar, 2 1).MasterCard and Visa introduced improved encryption systems in 2 1 to maketheir smart cards more secure ("Security Gets Smarter," 2 1). Journal of Advertising,24(3), 25-4 . This level of acceptance eventually will occur in theUnited States. (2 1, April 3 ). Competitive Issues in Marketing Smart Cards The generally held perception is that electronic banking is somethingnew. EDI lowerssubstantially the cost and time associated with the transfer of informationbetween different functional elements within a banking organization, aswell as between an organization and outside associates and customers. smart cards are finding securityniche: Smart cards offer a solution for a variety of secure accessapplications. unveiled a data storage product - a multi-function chip/optical smart card - in Paris in 1994. To provide security and authentication, smart cards typicallyincorporate circuitry capable of encrypting digital information. Smart cardsadd a dimension to e-commerce by providing consumers with instant access tothe money in their bank accounts, as well as by facilitating payments forInternet purchases (Fennell, 1997). First Union followed thisinitiative with a similar smart card program for the 1996 Atlanta SummerOlympics. (2 1, August 1 ).Africa News Service, 1 8222u3592. CyberCash is actually an American company founded in 1994 withheadquarters in Virginia. Demands that brand of the product. Brand equity is defined as the "added value a given brand providesa product beyond the functional benefits provided" (Masters, 1997, p. A plastic revolution: Canadianshoppers put the "smart card" on trial. The consumer's perception of brand value derives primarily fromperceptions - rational or emotional - that set the brand apart fromcompetitive brands. This use of the Mondex card to pay mass transit fares ismade possible by a unit called the Modula-Executive, which is compatiblewith PCs supporting VGA video standards and connects to the CPU via asingle cable. Will search other sales outlets for the preferred brandif it is not available at a purchase site. As is true of credit cards, however, smart card users in the UnitedStates are not responsible for charges incurred through fraudulent use of asmart card subsequent to the time of user-notification to the relevantsmart card issuer that a smart card has been stolen or lost. The acceptance of smart cards byconsumers and businesses in the United States, however, has been a slowprocess. Mosttransaction card issuers charge fees ranging from $1 to $5 each timecustomer uses a debit card. (1997, February 1). Drexler Technology Corp. With smart cards, users pay a fee to downloadmoney onto smart cards that is the same amount that the pay each time theyuse a debit card. Fortune,131, 24. Using computer chip technology, the Mondex cards are actuallymicrocomputers with a memory that allows them to store and retrieveinformation on purchases. edu/~1masters/MKTG/UG/Product2/sld 1.htm Neel, D. 2). (2 1, March 5). Cashless society becomes reality. Credit card chips with little to do:Flood of smart cards precedes clear idea of suitable uses. Peterson, I. Providian Bank in the United States now incorporatessmart card technology in many of the Visa cards that it issues ("ProvidianFinancial," 2 1). Theseconsumers believe that smart cards are secure ("Consumers Give Thumbs-Up toSmart Cards," 2 1). Again, the only merchants accepting the smart card were those atthe Atlanta Olympic Games. Users can retrievebalances (bank account balances and smart card balances), as well as theirpurchase histories involving use of the smart card. Police swoop on smart cards piracy, nets 6 hackers. Frankfurt, Germany:Association of German Banks. One security featureallows smart card users to use the tracker to lock the smart card so thatthe card is unusable until the user enters a specified release code(Peterson, 1997). In Japan, the CyberCash payment system ties into the Bank of Japan'selectronic payment system illustrated in Figure 1 (on the following page).An illustration of the CyberCash smart card payment system is in Figure 2(on page 7). Veridicom forges dealswith Fujitsu for sensors, Precise Biometrics for cards: Smart cards touchoff interest in fingerprint ICs. Private corporations also are using smart cards aspersonnel security identification cards (Hulme, 2 1). Industry Week (245), 41. New York Times,A1. Brand recognition describes the stage of consumer awarenesswherein a person has knowledge of the existence of a product brand, butholds no preference for that brand over any other brand of the product. (2 1, August 12). Consumers give thumbs-up to smart cards. The banks conducted a pilot test in aCanadian community in 1996, with the national introduction in 1997.. In 1996, British consumers began using Mondex cards to pay for publictransport fares. BritishTelecommunications equipped 2, households with smart phones, augmentedby 7 -to-8 public pay phones. (1997). smart cards: the technology, its adoption, competition in marketing smart cards, and security Introduction This research examines smart card technology, the adoption smart cardtechnology by transaction card issuers in the United States, competitivestrategies in the marketing of smart cards, and security issues involvingthe use of smart cards. Smart card security in Europe improved significantly in 2 1. asp?art=28 127 British try bus cards. (2 , November). Thecryptosystem embedded in smart cards scrambles the digital data intogibberish that is unintelligible to eavesdroppers. (2 1, August 13). (2 1, November 12). Datacommunication networks are essential to the success of the application ofEDI technology. This use is an important non-financial applicationof smart card technology (Neel, 2 ). An important strategy used by banks in the issuance of smart cardsinvolves extended efforts to build brand loyalty and brand value. Computer scientists discovered that it is possible to break asmart cart's cryptographic scheme by tricking the card into making errors.For an electronic payment system to work effectively, both smart cardissuers and smart card users must believe that all digitally recordedinformation is safe; that transactions are legitimate; and that onlyauthorized parties are able to use smart cards and smart card payment-systems (Peterson, 1997). Hulme, G. (1996, March 18). Fennell, T. When a smart card placed in an electronic tracker (referred to as awallet), the smart card becomes a small computer. One focus of this research is on the adoption ofsmart card technology in the United States, as opposed to the introductionof the technology, because the introduction of smart card technology in theUnited States occurred several years ago.
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