Ray Van Eng (01/02/97)
But in the world of electronic money and digital cash, magnetic stripe cards are certainly being viewed as totally inadequate especially in terms of data memory storage and providing security in preventing fraud for the users. That is why smart cards are all the rage these days. Basically, smart cards can be divided into two types. One of them needs to perform memory intensive task during the course of a transaction. Those that belong to this group would include the re-loadable cash cards that are used to store monetary value and are required to validate and negotiate with point-of-sale equipment, execute customer loyalty schemes, keep a full audit trail for printing or viewing by the user later, be able to lock and unlock themselves to prevent unauthorized access and to carry out a host of other mathematical and programming functions. The other kind is simply used to verify the cardholder (e.g. an ID card) or debit a certain amount of money from a pre-paid cash card with no auditing required (e.g. transit or telephone cards). Of course, the more computer memory a card carries, the more expensive it is to make. Smart card manufacturers have to strike a balance here. But security features and the ability of the smart card to prevent fraud by making the device very hard (read costly) for those with criminal intents to duplicate are what make the smart card technology so important in this age of electronic commerce and digital communication. The French are one of the most ardent users of smart cards, after all it was invented there more than 20 years ago. Currently, there are more than 30 million smart cards in circulation in that country. And they have found that smart cards with personal identification numbers (PIN) can effectively cut the cost of fraud from what is used to be $4 to $5 per card a number of years ago to almost zero today. There are definitely many situations where a smart card is not used to perform memory hungry operations but would need to have security coding built into it. Toshiba Corporation is one company who is seizing the opportunity to provide low cost smart cards for this market segment. Smart cards made by Orga, Gemplus, Schlumberger, and others vary greatly in manufacturing cost that ranges from less than a dollar to about $20. In contrast, a magnetic-stripe card may cost from pennies or less to $2 or $3. The Japanese manufacturer says that they could mass produce a smart card (the Toshiba's CZ-3018) that sells for about 200 yen (>US$2) each and would include an 8-bit CPU (central processing unit) with 6 kilobytes of ROM (read only memory) and 128 bytes of RAM (random access memory). In Japan, the Nippon Telegraph and Telephone (NT&T) alone attribute 10 billion yen (US$950 million) losses a year to counterfeit magnetic cards. In the world of arcade games, Pachinko (a kind of vertical pin-ball machine) operators have complained that pre-paid value card forgeries have seriously cut into their profits and cause havoc (not to mention lost revenues) with card issuing banks. Both NT&T and the Japan Leisure Cards Association
are looking forward to use smart cards to solve their security problems.
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