MasterCard began testing the viability of its smart card strategy in 1999 when it partnered with the Acer Group and Fubon Commercial Bank to launch a Mondex cash card program in Taiwan. Shuan Ghaidan, MasterCard’s vice-president for advance payment systems, Asia-Pacific tells ZDNet Asia all about it.
The pilot program was supposed to last only six months, but it proved to be such a success that MasterCard let it run for another 8 months before shutting it down. Mondex is an international cash card standard that allows a card to hold up to 6 different kinds of currencies.
The Mondex trial in Taiwan is only the tip of MasterCard’s plans for the smart card. As far as MasterCard is concerned, card embedded chip technology will be the convergence point of all the e-payment mechanisms that are being developed today.
“[E-payment] technology is going to converge at a level where all your payment functions, all your loyalty functions, all your electronic wallets, virtual cards, pseudo-card numbers are all going to be stored on this card,” said Shuan Ghaidan, MasterCard’s vice-president for advance payment systems, Asia-Pacific. “And banks that are taking up this whole new strategy of going forward are eventually going to end up controlling the transactional environment, much as Microsoft, very cleverly, ended up controlling the office automation and personal computing environment.”
Chip technology is crucial to the e-payment process because of its capacity for data encryption. The magnetic striped cards, although endowed with security features such as holograms, card check values and verification values, has never been able to escape the fate of being duplicated exactly when the right equipment are available.
Smart cards, on the other hand, are capable of encrypting and decrypting data, performing sophisticated authentication applications such as PKI and digital signatures. That, according to Ghaidan, is the chief reason why the cards will play such a prominent role in the future of e-payment.
“This is not only going to be used in a shop. It is going to be an electronic identity card in the real world as it is in the virtual world,” said Ghaidan. “And when I enter the virtual world, when I put in my card and enter my pin, everybody will be able to easily validate that I am who I say I am.”
More onThe State of ePayment.
MasterCard currently has close to 3 million chip-embedded cards circulating in the Asia-Pacific region. Among the lead issuers is HSBC, who has half a million smart cards registered to its customers.
With the trial in Taiwan, MasterCard needed to test consumer response to the security features and convenience of the card. Some 2,000 cards were issued to Acer employees, 55 merchants were enrolled into the program and vending machines and terminals were placed throughout Acer facilities. A cafeteria in the Hshih-Ji Oriental Science-based Industrial Park was made fully smart card enabled.
The results proved to be resounding. As much as 96% of the cardholders reported satisfaction with the Mondex cards - 37% were impressed with the convenience; and 15% responded to the security features of the card.
“The results from the pilot project were beyond anything we’ve expected,” Ghaidan noted.
The program, launched in the October of 1999, used a single application card with limited processing capability. For PKI and other applications to be added on to the card, a different kind of processing power was needed.
That breakthrough was achieved late last year when MasterCard jointly developed with KeyCorp Inc. a 16 bit smart card that hosts an encryption co-processor that reduces the time of encryption and decryption down to a length of time that is unnoticeable to the user.
While such technology has been available for some time, what is significant about the MasterCard-KeyCorp development has been their ability to keep the cost of producing such a card at below US$3, which is a major improvement from the cards that have been produced before.
The card was issued this February in a pilot program launched by MasterCard and the Kookmin Card Co., a subsidiary of one of Korea’s largest banks. The new cards contain the MULTOS operating system, Mondex e-cash functionality and MasterCard’s credit/debit applications.