Network: Is it a licence, is it a wallet?

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The Independent Culture
Coming sooner than most people expect, the smartcard revolution will touch every aspect of our lives. Ian Grayson reports on the latest developments and how both hardware and software companies are preparing for huge growth

It seems smartcards just keep getting smarter. Thanks to advances in microchip design, the latest generation of the credit card-sized devices boasts data-processing power comparable to that of early personal computers.

When that is combined with increased storage capacity and better encryption capabilities, the smartcard becomes a powerful tool - one that industry experts predict will be one of the hottest technologies of the late 1990s.

Smartcards are already a part of life for many people. Applications range from mobile telephones and satellite decoders to loyalty cards and building access passes. Both Visa and MasterCard are conducting major smartcard trials around the world. Both companies intend to replace their magnetic- stripe cards with smartcards by 2000.

Earlier this month, British Airways announced it would be trialling a smartcard-based system that would track passengers through airport terminals. Passengers will be given smartcards to put in their pockets when they check in and sensors around the terminals will allow staff to monitor the passengers' progress. If somebody is then late boarding their flight, staff will be able to see whether they are in the bar or delayed at passport control.

One of the largest UK trials of smartcard technology is being conducted in Northampton and Dunfermline, where more than 100,000 smartcards are being issued to customers by banks. The cards will be accepted by more than 600 retailers who have been equipped with special terminals and take the place of traditional credit and debit cards. If successful, the system will be rolled out nation-wide.

But while such applications have been attracting considerable attention, developers have found themselves limited by the fact that each card can only perform one function. A card can act as a credit card or a loyalty card but not both. As more cards are issued, users could find themselves with a wallet full of smartcards.

Now a new generation of cards that can perform more than one task is about to hit the market. "Multi-function smartcards" are expected to cause an explosion in use during the next three years.

Little more than a chip developer's pipe-dream 12 months ago, they are now being offered by all big card manufacturers.

They could act as an electronic purse, an identity card and driving licence. A bank could issue a multi-function card in association with a mobile telephone company, enabling users to pay for goods and services as well as make telephone calls.

Such capabilities are made possible by equipping the smartcard with an operating system similar in concept to that which runs personal computers. Developers then add software for specific tasks.

Two industry leaders unveiled their latest offerings at an exhibition in Paris last month. Schlumberger announced a new generation of its Cyberflex multi-function card. Using an operating system based on the Java language, the card has 20 per cent more on-board memory than earlier generations, allowing it to run more complex applications.

Companies evaluating the technology include Daimler-Benz, which is considering it for use in future Mercedes cars to monitor performance and servicing requirements, and the mobile telephone handset company Nokia, which is evaluating the card's ability to process passwords for use in future on- line banking applications.

At the Paris event, the French-based smartcard manufacturer Gemplus announced its GemXpresso card, which also has a Java-based operating system. The card will be used by software developers to create a wide range of different smartcards for banks, credit card companies and other potential issuers.

The industry focus on delivering powerful smartcard platforms to software developers is set to continue. Many within the smartcard industry believe hardware has now developed to the point where it offers exciting potential to developers keen to write more complex applications.

"It wasn't the technology providers such as IBM and Apple that started the PC revolution - it was the software companies," said Tom Lebsack, Schlumberger marketing and business development director. "The same thing is going to happen in the smartcard arena. It will be the applications that drive user demand."

Others in the industry agree. Motorola, which makes smartcard chips, sees multi-function cards as a huge opportunity during the next few years.

An industry research company, Dataquest, predicts the annual market for smartcard chips will rise to 1.32 billion units by 2001. By then, Motorola will make more than 10 million chips a week.

At the same time, the capabilities of the chips are developing at a staggering rate. According to Eurosmart, a European industry organisation, between 1971 and 1996 the number of transistors on chips increased by a factor of 5,000. The organisation predicts that, by the end of the millennium, the total will reach 10 million - all in a space the size of a fingernail.

"It is potentially a very high-volume business for us, as more people recognise the potential of the smartcard and its ability to change the way they live their lives," said Carlos Genardini, senior vice president and general manager of Motorola's consumer systems group.

"In the US, we are on the knee of the hockey stick curve when it comes to smart growth. But in Europe, the market is way beyond that point and really starting to explode."