Getting smart about identity

Gemplus President and CEO Alex Mandl predicts the company will triple its identity business worldwide over the next three years, as greater scrutiny is placed on security and access.

Alex Mandl, president and CEO of Gemplus

newsmaker From completing multimillion-dollar acquisitions to creating new regional posts, smart card maker Gemplus has orchestrated a string of moves to gear itself for expanding its business in the growing security and identity market.

In June, the smart card player finalized its acquisition of Setec Oy, a Finnish company specializing in the field of security and identity solutions. The alliance is seen as a booster to Gemplus' foray into the e-passport arena, as Setec services a number of governments, particularly in Europe.

Closer to the region, Gemplus appointed Martin McCourt as its president for Asia, and subsequently roped in Suzanne Tong-Li, a former executive of rival Axalto, as its president for China. Both positions were newly-created, to provide a more regional-based reporting model, according to Gemplus President and CEO Alex Mandl.

In April 2005, the Luxembourg-based company scored its first e-passport win in Asia when it secured the rights to supply contactless chip technology and supporting systems to the Immigration & Checkpoints Authority of Singapore for use in biometric passports.

ZDNet Asia caught up with Mandl during his visit to Singapore, to find out about the company's plans for Asia and his views on a claim that smart chip and PIN technology make identity theft easier.

Gemplus has made a few announcements specific to the Asia-Pacific region over the last several months. What can we make of that?
The changes indicate continued effort and investment, and focus on making sure that our position and participation in Asia is consistent with our expectations.

Our expectations are pretty straight forward--we believe that if you want to be a global leader in the business, you need to also be the leader in Asia. We happen to believe that Asia is the fastest growing segment around the globe in (the smart card) business, and therefore we want to continue to strengthen and refine our resources to make sure we fully participate in the growth opportunities.

We have shifted more towards a regional [reporting] model, driven by the fact that with a regional model the ability to respond to customer needs and requirements are better--you have your resources right there and can respond from a regional perspective without going back to the home base.

How do you manage the challenges that the region presents, given its diverse nature?
It's really no different from the rest of the world. If you look at Europe, there are very different economies. Every part of the world has very different marketplaces and demands.

The SIM card is very different in one place compared to another place. In some parts of the world, it's a very simple, low-capacity device serving a basic need of authentication, whereas in other places, the SIM card is a large megabyte platform for operators to bring their applications to their customers, with dramatically different product, service, support and innovation requirements, and so on. Our markets vary significantly from country to country, operator to operator, in every place we do business.

What are the key drivers of growth for Gemplus in the smart card market?
The largest part of the business today is the wireless SIM card market. Different markets have different requirements, but as wireless is one of the key growth drivers in the communications media world, the SIM card grows with that, since 80 percent of the global networks are GSM networks. GSM networks require the SIM card, so that drives a lot of inherent growth.

As bank credit cards and bank services migrate from magnetic strip cards to a chip-based card for security, application or convenience reasons, that migration is also a very important growth driver. To be fair, that migration today is mostly taking place in Europe,

although it is starting in Japan, Singapore and is underway in Malaysia and Latin America… but not yet in the United States. That transition will go on for the next four to six years.

The third segment is the identity and security market, and that is simply the reality of the current environment, where in the post 9-11 setting, security has become a growth business. Various forms of physical security--wearing identity badges for physical access into buildings, countries, airplanes--is very much a growth business. That segment is possibly the fastest growing segment in our business. We think that this business will triple over the next three years, worldwide.

How much headway do you see Gemplus making in biometrics and e-passports?
We've acquired Setec, which will further strengthen our capabilities in this business in the security environment, and in the ePassport environment, where we won business in Singapore. We believe we can leverage that e-passport experience into other parts of the world.

That part of the business will also be an important growth driver--very different from the SIM card and bank business, and [revolves] around providing chip technologies into various ID forms that will address security concerns that the world has today.

At the end of the day, you cannot have 10 different standards in the e-passport environment.

There is no doubt, that over time, some form of e-passport will be developing, most likely set by standards that the U.S. will have some influence over. There are lots of activity between Europe, the U.S. and Singapore, to make sure there's a sense of commonality and standards, because at the end of the day, you cannot have 10 different standards in the e-passport environment.

It's taking longer and there've been some postponements, and I think it's logical. That's the right thing to do because the standards that are required on a global basis have not been fully agreed to. Therefore, it is appropriate to take some more time to make sure that the global set of standards will be developed [properly], agreed to and implemented. I think over the next five years and beyond, the e-passport deployment will be a very active and important part of the ID business.

Some critics have claimed smart chip and PIN technology have not stemmed the ID theft problem. What are your thoughts?
Our approach is that it is a requirement and a standard that's been set by Visa, MasterCard and Eurocard, and it is driven mostly by fraud.

When you read about the identity theft in the U.S. and the consequences of that, [you will appreciate that] having a more secured card makes all the difference in the world. The fact is, with the magnetic strip in the U.S., when you use a credit card, the machine or the network does not know who is using that card. If you have a chip-based card, and you put in a code, the odds are dramatically higher that you're the proper owner of that card, because the combination of the card and knowing the code just reduces the likelihood of theft and fraud by a very significant factor.

People continue to debate this fraud situation, but the fact is, the standards that have been set by Visa and MasterCard are designed to reduce that fraud, and it is doing that. If you look at the U.K., where the transition has taken place, the improvement in the fraud case is very significant.

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