Smart Card Overview

A smart card, a type of chip card is a plastic card embedded with a computer chip that stores and transacts data between users. This data is associated with either value or information or both and is stored and processed within the card's chip, either a memory or microprocessor. The card data is transacted via a reader that is part of a computing system. Smart card-enhanced systems are in use today throughout several key applications, including healthcare, banking, entertainment and transportation. To various degrees, all applications can benefit from the added features and security that smart cards provide. According to Dataquest, the worldwide smart card market will grow to 6.8 Billion units and $11 Billion by 2006.

Applications

First introduced in Europe over a decade ago, smart cards debuted as a stored value tool for pay phones to reduce theft. As smart cards and other chip-based cards advanced, people found new ways to use them, including charge cards for credit purchases and for record keeping in place of paper.

In the U.S., consumers have been using chip cards for everything from visiting libraries to buying groceries to attending movies, firmly integrating them into our everyday lives. Several states have chip card programs in progress for government applications ranging from the Department of Motor Vehicles to Electronic Benefit Transfer (EBT). Many industries have implemented the power of smart cards into their products such as the new GSM digital cellular phones to TV-satellite decoders.


Why Smart Cards

Smart cards greatly improve the convenience and security of any transaction. They provide tamper-proof storage of user and account identity. Smart cards also provide vital components of system security for the exchange of data throughout virtually any type of network. They protect against a full range of security threats, from careless storage of user passwords to sophisticated system hacks. Multifunction cards can also serve as network system access and store value and other data. People worldwide are now using smart cards for a wide variety of daily tasks, these include:

Loyalty and Stored Value

A primary use of smart cards is stored value, particularly loyalty programs that track and incentivize repeat customers. Stored value is more convenient and safer than cash. For issuers, float is realized on unspent balances and residuals on balances that are never used.

For multi-chain retailers that administer loyalty programs across many different businesses and Point of sale systems, smart cards can centrally locate and track all data. The applications are numerous, from parking and laundry to gaming, as well as all retail and entertainment uses.

Securing Information and Physical Assets

In addition to information security, smart cards achieve greater physical security of services and equipment, because the card restricts access to all but the authorized user(s). E-mail and PCs are being locked-down with smart cards. Information and entertainment is being delivered via to the home or PC. Home delivery of service is encrypted and decrypted per subscriber access. Digital video broadcasts accept smart cards as electronic keys for protection. Smart cards can also act as keys to machine settings for sensitive laboratory equipment and dispensers for drugs, tools, library cards, health club equipment etc.

E-Commerce

Smart cards make it easy for consumers to securely store information and cash for purchasing. The advantages they offer consumers are:
The card can carry personal account, credit and buying preference information that can be accessed with a mouse click instead of filling out forms.
Cards can manage and control expenditures with automatic limits and reporting.
Internet loyalty programs can be deployed across multiple vendors with disparate POS systems and the card acts as a secure central depository for points or rewards.
Micro Payments - paying nominal costs without transaction fees associated with credit cards or for amounts too small for cash, like reprint charges.

Personal Finance

As banks enter competition in newly opened markets such as investment brokerages, they are securing transactions via smart cards at an increased rate. This means:
Smart cards increase trust through improved security. Two-Factor Authentication insures protection of data and value across the internet. Threats such as the "Man in the middle" and "Trojan Horses" that replay a user name and password are eliminated
This will improve customer service. Customers can use secure smart cards for fast, 24-hour electronic funds transfers over the internet
Costs are reduced: transactions that normally would require a bank employee's time and paperwork can be managed electronically by the customer with a smart card

Health Care

The explosion of health care data brings up new challenges to the efficiency of patient care and privacy safeguards. Smart cards solve both challenges with secure storage and distribution of everything from emergency data to benefits status.
Rapid identification of patients; improved treatment
A convenient way to carry data between systems or to sites without systems
Reduction of records maintenance costs

Network Security

Business to business Intranets and Virtual Private Networks “VPNs” are enhanced by the use of smart cards. Users can be authenticated and authorized to have access to specific information based on preset privileges. Additional applications range from secure email to electronic commerce.

Physical Access

Businesses and universities of all types need simple identity cards for all employees and students. Most of these people are also granted access to certain data, equipment and departments according to their status. Multifunction, microprocessor-based smart cards incorporate identity with access privileges and also store value for use in various locations, such as cafeterias and stores.

source : http://www.smartcardbasics.com/overview.html