Magazine article CMA - the Management Accounting Magazine

Plastic with a Brain

Magazine article CMA - the Management Accounting Magazine

Plastic with a Brain

Article excerpt

More than just a "souped-up" plastic card, the smartcard offers businesses a multi-functional strategic tool.

The plastic card has entered a new era. With a powerful combination of on-board intelligence and increased memory capacity, the "smartcard" has arrived. Its potential is unbounded. It can help businesses generate more revenue, including financial institutions that can market it as a sophisticated payment instrument. Better equipped than plastic cards to control data integrity, the smartcard can improve control through fewer losses and greater security. And because it can handle multi-applications without jeopardizing data integrity, it can improve productivity and functionality.

The smartcard looks like a common credit card, but the resemblance ends there. Hidden in the thickness of the plastic, a powerful "brain" controls the card's functions and opens access to networks and computers. It allows the card to capture, verify, store and transmit information (transactions) in a way that can be directed to mainframe computers for further processing. It can also validate the identity of the cardholder through network access. In effect, the smartcard is a portable data storage device. It can process information to authenticate the card, identify the cardholder, encrypt and decrypt messages, and generate electronic signatures. Thus, it provides an automated form of user accountability, as it maintains a log that keeps track of such things as who used the card, when the transaction took place, and what merchandise was bought. The magnetic stripe card lacks this capability.

The contemporary contact or passive smartcards have undergone a number of changes resulting in better performance at lower cost. These cards all lacked the benefit of a self-authenticating feature: the ability to independently accept a PIN (personal identification number) plus associated data. Cards now incorporating this feature are called "active" or "contactless" smartcards. Unlike a passive card, which required a card-reader as an interface between the card and the merchant's terminal, the contactless smartcard works without an independent, physically separate card-reader.

Cards of all kinds

The smartcard is also known as an integrated circuit (IC) card. It can be categorized into three groups by interface type:

1. Contactless: The interfaces for this type communicate through radio frequency, inductive or infra-red methods. They are particularly useful in rapid transit systems and for goods distribution when a physical contact device might be too slow or cumbersome. "Super smartcards" can be included within this group. Rather than use an external device, a super smartcard has a keypad and display embedded into it. Super smartcards are used for high-security applications or for applications in which the card reader does not or cannot support a keypad and display.

2. Non-ISO Contact: Interfaces include cards developed either for a specific purpose or before the ISO (International Standards Organization) 7816 standards were established. These standards redefine the Identification Physical Characteristics, and define a number of physical, mechanical, electrical and other properties of the contact and chip.

3. ISO Contact: This interface is defined in the ISO 7816 standard, which describes the position, dimension and function of the contacts embedded on the card's face. (There are eight such contacts on the card, six of which are presently utilized.) ISO contact is the most common interface method for smart financial transaction cards. These cards include both memory-only and micro-processor cards.

Memory-only cards store programs or data. They replace transaction vouchers, magnetic media or currency. As they contain no processing capabilities or significant security, they are often used as a stored-value card or "electronic purse" for relatively inexpensive transactions like telephone tolls, rapid-transit fares, and road tolls. …

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