Techno-Balkanization: Why you'll wait for smart cards to reach your pocket
Or at least that seemed to be the takeaway of a surprisingly frank hour-long panel discussion at the Smart Card Forum on Wednesday among execs from Citibank, Visa International, American Express, IBM Corp. (NYSE:IBM), MAOSCO Ltd., GTE (NYSE:GTE) and the U.S. General Services Administration.
They were on hand to discuss the task of getting today's disparate smart-card formats working together -- a task that has proven as difficult as creating the League of Nations. Right now, each smart-card maker has its own operating system, so choosing a smart card frequently means that a customer is limited to that particular format.
"We are all driven by self interest," said Miguel Abramowicz, vice president of Citibank. "(For the time being,) proprietary systems mean better business." In other words, when you own the playing field and can establish the ground rules, it can mean stacking the odds -- and potential profits -- in your favor.
Skinny on thin cards
Smart cards resemble credit cards with one major difference: Each card has a computer chip embedded into the plastic. Most of these cards can run simple applications, the most important of which is encrypting the data stored in the chip.
That data can be information for identification, digital cash, "points" for a store's loyalty system, banking or personal medical information. Europe and Asia have been much more active in promoting smart cards than the United States. For example, Norway has decided to provide its 5 million citizens with smart cards for identification, payment, access control, medical records and pay TV. Germany has issued all its citizens medical-records cards.
Too many choices
The problem is that in Europe, Asia and the United States, everybody is doing their own thing. As the result, the smart-card war will get worse before it gets better.
That's not good, said Hugh Kingdon, vice president of marketing for MAOSCO Ltd., the industry organization that supports the MultOS operating system for smart cards.
"As a user, if I drop my cards, I want to be able to pick them up and use them in any order," he said during the panel discussion. "That means we need to work on interoperability."
A study released on Wednesday by the Smart Card Forum reinforced Kingdon's opinion. Most of the users surveyed -- more than 65 percent -- want to carry only one or two smart cards, and they want them to have many functions. The users also requested the ability to add applications, such as the ability to keep track of their drug prescriptions.
Business first, customers later
Yet, Wednesday's statements indicated that the companies were more interested in establishing their intellectual property rights and brand recognition before establishing standards.
"From a corporate perspective, everyone wants their own proprietary format to become the standard," said Steve Tosha, general manager of smart-card services for GTE, during the discussion.
Others indicated that standards bodies move too slowly to be a practical way to drive the smart-card industry. The fear was that Microsoft could buy its way to a de facto standard if the industry does not move fast enough.
"Gates has the resources to distribute 200 million cards with every PC and essentially make his own standard," said Citibank's Abramowicz. "A standards organization just moves too slowly."
Or in words of Matt Scheuing, vice president of marketing and business for telecommunications giant U.S. West, who moderated the event: "Is interoperability ultimately a question of who is going to win? That seems to be the feeling here."