This month Smart Card Talk is featuring a profile of the Smart Card Alliance–providing a snapshot of Alliance perspectives on market trends, obstacles and drivers for smart card technology in the U.S.
1. What is the Smart Card Alliance’s main mission?
The Smart Card Alliance mission is to accelerate the widespread adoption, usage, and application of smart card technology in North and Latin America. We do this by bringing together users and technology providers in an open forum to address opportunities and challenges for our industry. This balance makes the Smart Card Alliance a unique place where users, issuers and suppliers meet to exchange ideas, discuss common issues, and work together to develop and expand the use of all types of integrated circuit “chip” cards and alternative form factors using smart card technology in the Americas.
An important aspect of our mission that often is missed is that we cover smart card technology in all form factors. So regardless of whether the technology is built into a plastic card, a key fob, a USB token, a subscriber identity module (SIM) or secure element in a mobile phone, or some other innovative new form factor, the Alliance is engaged in promoting the use of the technology in payment, healthcare, transportation, identity, access control and telecommunications applications.
2. What role does Smart Card Alliance members have in supporting that mission?
Our mission could not be achieved without the participation and collaboration of our members in Alliance activities and without the efforts of member organizations in the developing the market. Our members come from all industry sectors, including financial, retail, transit, corporate, government, healthcare, mobile and others, along with the technology and solution providers that service these sectors. This breadth of membership not only allows us to be effective in each end market, but also allows us to promote the best practices and lessons learned across markets to accelerate adoption of the technology.
3. What trends are developing in the market that the Smart Card Alliance hopes to capitalize on?
Smart card usage has become pervasive in the United States and elsewhere around the globe. The three primary markets where smart card technology has been widely deployed–bank cards, identity credentials (like passports and government IDs) and mobile phones–have created a stable root system for new markets and applications to emerge and grow in size, such as transit fare payments, corporate badges and security tokens and NFC mobile phone and add-on devices. As industry stakeholders address increasing security challenges and demands for new faster, more efficient, and lower cost services, the attributes that smart card technology provides are increasingly recognized as important to these emerging markets and solutions. This is resulting in an ever-widening array of new uses for smart card chips. The network effect is that these products and services begin to overlap, so that payment cards are functioning more like identity cards and vice versa, and mobile devices are taking on roles that the traditional smart card form factors traditionally served. The consistent thread among them all is the smart card chip inside. With new uses and new markets for smart card technology come demands for more information, education and networking for industry stakeholders and potential new customers–a role that the Smart Card Alliance must be prepared to fill.
4. What obstacles must be overcome to capitalize on these opportunities?
The Smart Card Alliance has to evolve to be able to address the rapidly changing markets and influx of new technology and organizations. We need to find the needed expertise to address new markets like NFC, machine-to-machine communication, and identity in cyberspace. It is time to grow the organization internally to meet the future demands ahead. We have grown more than 100% and added three new industry councils in the last few years to focus our member-supported resources on new smart card markets for emerging payments, mobile, identity, and healthcare applications. We added a comprehensive international professional development program (LEAP) and smart card industry certification training program (CSCIP) to keep industry professionals informed and educated. We expanded our market focus to include all of Latin America and, with our partner organizations, Europe, Asia Pacific, and Canada, where we are taking an increasingly important role globally. We’ve done this while keeping our staff size and contracted resources very small to control costs and to maximize the value for our members. But sustainable growth demands new resources from new members, new partnerships, and a global view of the industry for the decade ahead.
5. What are the key factors driving smart card technology in the identity and security markets in the U.S.?
Ensuring the security of data, systems and networks and authenticating the identity of individuals accessing online and physical resources are critical priorities for all organizations. Every market sector has these requirements–Federal, state and local governments, enterprises, healthcare organizations, financial institutions, and telecommunications providers. Smart card technology addresses these critical requirements–providing multi-factor authentication of an individual’s identity when used with a PIN or biometric, protecting the privacy of the individual’s personal information, delivering a highly secure token for carrying the identity credential, and enabling secure, authenticated and encrypted communications and transactions.
In the past several years, Homeland Security Presidential Directive 12 (HSPD-12) and the FIPS 201 and Personal Identity Verification (PIV) card standards have driven smart card adoption in the Federal government. This standard has been extended to non-Federal issuers, with the PIV interoperable (PIV-I) guidance, which we expect to drive deployments well beyond the Federal government. PIV-I is getting broad interest from state and local governments, first responder organizations and commercial enterprises who do business with the government. By being able to take advantage of published standards, the wide array of products supporting PIV cards and the Federal public key infrastructure, organizations can lower the time and cost for implementing identity initiatives.
We also expect to see continued focus on strong authentication technologies in commercial organizations–in part driven by other Federal initiatives. One example is the National Strategy for Trusted Identities in Cyberspace, which calls for the creation of an online environment where individuals can voluntarily choose to obtain a secure, interoperable and privacy-enhancing digital identity credential from a variety of service providers–both public and private–to authenticate themselves online for different types of transactions. NSTIC implementation is expected to drive the use of smart card technology for high-value transactions and identity authentication.
Another example is work that the Department of Health and Human Services (HHS) Office of the National Coordinator (ONC) is doing on electronic health records (EHRs) and the nationwide health information network (NHIN). With the mandate to move to EHRs, strong authentication of both patient and provider identities is an absolutely critical requirement. As ONC finalizes the policies, strategies and standards for ensuring the privacy and security of patient data, smart card technology will clearly be in the mix of solutions for healthcare organizations or trusted third parties who issue digital credentials and who must ensure the privacy and security of health records.
With data breaches and identity theft continuing to increase, the smart card industry will continue to see an expanding market for the proven, standards-based solutions that are the hallmark of the industry.
6. What are the key factors driving smart card technology in the payments and mobile markets in the U.S.?
The U.S payments and mobile markets in 2011 are going to be extremely interesting for smart card technology, with two critical drivers–the global migration to EMV and the intense interest in using NFC-enabled mobile devices for secure applications.
Let’s first look at EMV. Financial institutions in Europe, Latin America, Asia/Pacific and Canada are issuing contact or dual-interface EMV smart cards for credit and debit payment (commonly referred to as “chip and PIN”) or migrating to EMV issuance. According to EMVCo, approximately 1 billion EMV cards have been issued globally and 15.4 million POS terminals accept EMV cards.
The United States did not choose to implement EMV in the past. The U.S. has historically had relatively low fraud rates, due to nearly 100 percent online authorization and sophisticated real-time fraud detection by the issuer authorization systems. In addition, substantial costs had been associated with the deployment of an EMV infrastructure. Without a perceived fraud problem and given the cost of implementation, U.S. financial institutions and merchants did not make the investment required to convert legacy bank card issuance and acceptance infrastructure to the EMV standard.
Today, however, several factors are driving the U.S. payments industry to reconsider deployment of EMV for payments. Most important are the increasing amount of card-related fraud losses and the cost of enhancing security features incrementally. In addition, U.S. travelers abroad are discovering that their magnetic stripe bank cards are sometimes rejected. Finally, as other markets have adopted chip cards, the per-unit costs for cards and devices have decreased, and some POS device manufacturers now sell only hybrid devices with both chip and magnetic stripe capabilities–lowering the cost of migration. These factors are combining to create increased dialog and interest in EMV for payment applications in the U.S., with one U.S. issuer–the United Nations Federal Credit Union–already migrating their cardholders to EMV chip cards.
Moving to the mobile market, we’ve been talking about NFC-enabled mobile payments and applications for a number of years, with a variety of pilots testing consumer reaction and implementation models. Consumer and merchant reaction has been extremely positive–using a mobile phone for payment and other mobile marketing applications is easy; it fits with the strong consumer interest in new mobile apps; and merchants see business benefits from both payment and marketing applications (for example, coupons and loyalty programs).
The market, however, has been slow to develop as we wait for NFC technology to be embedded in phones and as industry stakeholders work out the business models and develop the infrastructure for delivering the NFC-enabled applications.
It looks as if 2011 will start to see NFC action–in phones, infrastructure and applications. With both announcements (Google Nexus S Android device, Nokia Symbian-based phones) and rumors (Apple iPhone version 5, HTC and LG), millions of NFC-enabled phones are expected to hit the market in 2011. The Isis joint venture (involving AT&T, Verizon and T-Mobile) was announced in November to provide a national ‘commerce’ network for NFC-enabled mobile wallets, with Discover Financial Services and Barclaycard providing the financial services backbone. In addition, Visa, MasterCard and contactless payment card issuing financial institutions are rolling out programs with contactless stickers and NFC-enabled microSD cards, mobile phone skins and adaptors, and SIM adaptors. Add to this continued merchant POS migration to future-proof POS systems and support enhanced security and contactless, NFC and EMV applications, and 2011 may see the spark that ignites the mobile contactless payments market.
7. How do Alliance’s industry councils help to advance smart card adoption?
We started the industry councils in 2004 to focus on specific issues and opportunities in the different vertical markets for smart cards in the U.S. The strategy was established with two primary goals: to provide better focus for Alliance activities to drive adoption in each of the markets and to establish an organizational structure that provided members the opportunity to lead and contribute to the industry efforts.
The councils have been phenomenally effective in achieving both goals. Member-led and member-driven, the Smart Card Alliance industry councils make significant contributions to the smart card industry–publishing education and outreach material for different markets, responding to issues in the media, developing industry positions on key government initiatives, and establishing relationships with other industry groups. The councils’ work and results have led to strong positions for smart cards in many industry sectors, have helped to drive smart card implementations in the U.S., and have led to the Alliance being the “go to” organization for cross-industry collaboration and authoritative resources on smart card technology and applications.
This month’s newsletter article showcases the many council activities and deliverables from 2010.
8. What new things can we expect from the Smart Card Alliance in 2011?
The Alliance success in fulfilling its mission centers around three things–stakeholder engagement, education, and communications. The Alliance already has an impressive list of members, representing the most prestigious and most innovative organizations whose employees donate thousands of man-hours a year to support our activities to grow the smart card market. We will be recruiting new stakeholders in targeted markets–such as bank card issuers, mobile network operators, handset manufacturers, mobile software providers, Internet security companies, healthcare IT companies, government agencies, and smart card testing and training organizations–to increase the breadth of our industry stakeholders.
We will improve and expand the Alliance educational content by investing in the LEAP and CSCIP certification training programs and making the certification training available beyond the U.S. borders in the United Kingdom, Western Europe, Canada, and Asia Pacific. We will be producing new deliverables from our five industry councils in the form of new white papers, webinars, position papers, comments on emerging technical standards, and growing our in-person meetings, conferences, and exhibition events. Our communications to our members and the global smart card industry will improve by making improvements to our web site to make it easier to navigate and search within. Also, we are adding special interest slides shows, videotaped interviews with industry experts, and online virtual meeting places to add multimedia experiences for people seeking smart card knowledge.
It is going to be a great year for new innovations, new programs, and new growth for the smart card industry and the Smart Card Alliance. Thank you all for being a part of it.
Smart Card Alliance contacts
Randy Vanderhoof, Executive Director
Cathy Medich, Director, Strategic Programs
Edgar Betts, Associate Director for Latin America