Smart cards allow thousands of times the information storable on magnetic stripe cards. In addition, smart cards are more reliable, perform multiple functions and are more secure because of high security mechanisms such as advanced encryption and biometrics. Smart cards can and will hold a large amount of personal information, from medical/health history to personal banking and personal preferences. What steps need to be taken, and by whom, to guarantee the privacy of that information to the card holder? Privacy is a technology-neutral issue. It doesn’t matter whether information is recorded on paper in a doctor’s office file or resides in a payroll application on a mainframe computer. It is important to consider the privacy of information form the time it is collected, through the life of its use and until the time it is no longer needed and securely destroyed. It is not enough to protect information on a smart card. You must be equally concerned about all forms of the information from the original format in which it was collected (often paper form) to any and all backups and centralized database copies. The responsibility for the protection of the data belongs to the organization that requests it from the individual.


Their staff must understand Fair Information practices and follow them. There are many considerations beyond the typical analysis of who may read, change, delete, or add information. The Information and Privacy Commissioner/Ontario and the Advanced Card Technology Association of Canada have jointly developed a procedure called “Smart, Optical and Other Advanced Cards: How to do a Privacy Assessment.” The first of its kind in the world, this procedure is designed for card application developers and helps them to understand privacy principles, build privacy protection into their applications and document their steps.




Why are smart cards better than other cards?

More secure

Data stored on a smart card is protected by sophisticated security mechanisms. It is thus very difficult and expensive to thus fraudulently alter data or copy the cards. Changing from magnetic stripe (magstripe) cards to smart cards can dramatically reduce card fraud linked to counterfeit cards, as well as fraud linked to off-line transactions by making them secure.

Lower running costs

Merchants do not have to pay telephone costs for secure off-line transactions, thus making it economic for them to accept electronic payment for smaller value transactions.


Smart cards can perform secure off-line transactions which typically take a fraction of a second, compared with several seconds for on-line transactions. For applications such as the electronic purse, this time saving is perceived by card holders as a major advantage over other cards and cash. Some card issuers have developed smart cards using contactless technology (this uses a radio transmitter/receiver to make the link between card and terminal, so the cards just have to be waved near a terminal, rather than being inserted into it). This results in even faster transactions, leading to cost savings and improved efficiency in sectors such as mass transit.

Greater data capacity

Smart cards can store more data than magstripe cards. The development of multiple-application cards such as Hand-e, means that many different applications can co-reside on one card: credit/debit, e-purse, travel tickets, loyalty points and security identification, to name a few.

Smart card issuers exist in many different sectors and use many different applications. The Hand-e card is compatible with most of the large smart card operating system software. It also supports the Microsoft Windows for Smart Cards and the Java card, which support the Java programming language. Java allows applications to be created, deleted, and stored on smart cards, meaning that one can have a made-to-measure smart card, with smart card owners selecting the applications that will reside on their cards that will suit their personal circumstances and needs. Smart cards have been used to perform transactions not only via ATMs (cash dispensers), and point of sale (POS) devices, but also using the Internet, public pay phones, DSTV decoders, cell phones and smart phones.


  What can smart cards be used to do?

The first mass-market uses for the chip were telephone cards and bank cards, but other options are:

Electronic purse
Issued by Nemotech, this will allow one to avoid the hassle of trying to find the correct amount for paying for a purchase, because when the card is used for purchases, the exact amount will be deducted from the amount of money stored in the electronic purse (e-purse). This is perfect for small, everyday expenditure at shops, kiosks, vending machines, parking meters, public telephones, etc.

Security access control

Smart cards can be programmed to allow access to certain buildings, computers and/or computer networks, depending on the security clearance available on the card.

Telephone card

Far more advanced than the currently available cards, smart card can be used to identify the caller at a payphone, and thus allow billing to be deferred to their residential account.

Healthcare card

Smart cards can store medical treatment records, emergency information and health insurance status.

Government card

Many governments are committed to reducing costs and paperwork, smart card can achieve this goal by allowing them to be used as identification cards, drivers license cards, pensioners cards, passports and visas.

City/Campus/Corporate/Club card

Smart cards are very popular in closed user groups (residents of a city/town, students and staff of a higher learning institute, amusement park patrons, etc), where the cards can be used to purchase small items and services, depending on the circumstances.

Secure Internet payments

This is where the smart cards come into their own, as they offer a secure means of payment over the Internet, far more secure than that offered by credit/debit cards, and other “secure” methods of payment. The adoption of a common standard by issuers can allow for cross border/international purchases to easily take place.

Automatic public transport fare collection

Contactless smart cards have been adopted by public transport operators and have proven themselves to be very useful in this market, by automatically billing the consumer.

Customer loyalty card

Smart cards are successfully in use in various customer loyalty programs because they allow more than one loyalty program, per card. Loyalty programs record points and offer redemptions for customer loyalty. This allows the retailers to gather detailed information on customer buying habits, allowing them to target promotions more accurately.

Credit/Debit card
Magstripe combined with smart chip cards (hybrid cards) are currently available in many countries, but the new EMV specifications define that acquirers will have to update their networks, cards and terminals by 2005. The EMV standard specifies the use of smart cards, instead of magstripe cards.


 What are the benefits of smart cards? 


Smart cards are convenient and offer a range of value-added services that can be tailored to individual needs and can also be used on the Internet.

Smart cards reduce the risk of fraud, the costs associated with cash handling and telephone links linked to on-line authorisation, as well as the ability to offer loyalty schemes and giving a futuristic image to their business.


-ATM networks, POS networks and automated clearinghouses.

      - Operation in closed environments with a single card issuer or in open environments with multiple card issuers and acquirers.

       -Transaction settlement among multiple participants, with full audit capability and automatic report generation.

       -Acquisition and settlement of stored-value transactions from non- electronic purse schemes.

       Smart card access control for secure management of physical facilities (buildings, parking lots, etc.) and computer resources (networks, workstations, Internet, etc.)

       -Multiple types of electronic loyalty programs.

       -Secure cardholder identification.

The  platform was developed and is supported by Touch Technology International, located in Phoenix, Arizona.

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