Smart cards will boom.... if standards are harmonized

Europeans are the undisputed leaders in smart card innovation but a number of factors including standard wars threaten to thwart widespread adoption of the technology on the Continent, according to Datamonitor.

The market research company predicts that between 1998 and 2002, the total number of chip cards in circulation will double, hitting 1.5 billion while new cards in circulation could top 700 million. Driving the smart card revolution are killer applications such as banking, telecoms, health and transport projects. The arrival of multi-purpose smart cards -- cards that can be used to pay for transport, phone calls and other low-value public services -- will drive the take-up of the technology skywards.

But the widespread adoption of chip-in-a-card technology could be slowed by factors such as the level sunk investment in other systems and interoperability problems. Datamonitor e-commerce programme manager Geoffrey Doggart said: "Europe represents 70 percent of the global smart card market. In every smart card consortium, from chip maker to software companies, the technology is European. But standards are a key issue. Will all cards and readers behave in the same way?" said Doggart.

An EU working party is currently looking at whether standardisation should be at the card or terminal level. "The question many are asking is does the card issuer or the retailer pay for software upgrades. We do need commonality," he added.

In Europe, vertical sector smart card applications, such banking and telecoms projects, have been successful. Yet the transport sector is behind. London Transport (LT) has an ambitious multi-million pound wireless, smart card scheme in the pipeline and, after a few major derailments, it looks as though the project will go ahead. But commuters are unlikely to see smart cards replace paper tickets until after 2002. Delays were blamed on "technical complexities". Whereas in Hong Kong, a wireless smart card project has been up and running for more than a year. Doggart claimed that political and geographical barriers in Europe made it difficult to roll out this type of scheme.

The report also found that card vendors have had the upper hand because a lack of supply had allowed them to keep prices high. However, this trend is changing and these companies are seeing product profit margins fall and are now shifting their focus to smart cards services such as integration and consulting.


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