The Solution

In the early 1990s, the major card associations (Europay, MasterCard, and Visa) recognized that for smart cards to become acceptable, it was necessary to standardize the way they work, at least for banking applications. Considerable work was undertaken to reach agreement on a standard culminating in the so-called Europay MasterCard Visa (EMV) specifications.

EMV Specifications

EMV specifications define the physical characteristics (size, shape, thickness, position of contacts), the electrical characteristics (signals to be fed to each contact), command set (how to access data and functions on the card), overall card security methodologies (static data authentication, dynamic data authentication), and the data to be stored on cards for payment systems. The EMV specifications do not fully describe particular payment applications—that being left to individual card associations to define. They do describe the basic framework under which all payment applications will work. It is important to appreciate that although the EMV specifications describe how cards, terminals, and host systems interact, they do not describe how cards will be personalized, because different card manufacturers use different methodologies.

Visa Specifications

Visa has produced a specification that deals with the details of how a credit/debit application will operate in a Visa world. This is known as the Visa Integrated circuit card (ICC) Specification (VIS).

Smart Debit/Credit

VIS refers to an application called Chip Card Payment Service (CCPS). This name is gradually being replaced by the term Visa Smart Debit/Credit. The Visa Smart Debit/Credit has recently been introduced to a significant number of countries in the last year.

Visa Cash

The Visa electronic purse product is called Visa Cash. It is available in two basic forms: disposable and reloadable. There are two types of reloadable Visa Cash cards: the DES-based version and the public key version. The public key variant offers improvements in security because the public key algorithm is implemented on the card itself. Visa Cash is in use in many different countries around the world.

MasterCard Specifications

MasterCard has released a set of specifications describing their product, which they call Debit and Credit on Chip. These are functionally equivalent to the Visa VIS specification, although there are small variations.

MasterCard has recently implemented Debit and Credit on Chip on the Multos open platform card. The MasterCard electronic cash product is the Mondex purse. This can coreside on the same Multos card as Debit and Credit on Chip.

Other Specifications

In the UK, the Association for Payment Clearing Services (APACS) has developed a specification detailing the chip credit and debit features that will be implemented in the UK. This is known as the UK ICC Specification (UKIS), and is effectively a subset of the Visa VIS specification. UKIS does not implement the PIN on the card feature because PINs at point of sale are not used in the UK. It is understood that Europay has recently developed a credit/debit smart card scheme (see sidebar, “Point-of-Sale Solutions Are Getting Smarter”).

Point-of-Sale Solutions Are Getting Smarter

With the help of loyalty-based smart-card programs, retailers and banks are hoping to increase spending and boost customer retention. For solution providers, the promise of smart-card technology may lead to increased revenue despite flagging POS terminal sales.

Up until now, smart cards haven’t made much headway in the United States. The U.S. telecommunications infrastructure is widespread and operates at affordable rates. That’s allowed magnetic stripe cards to function very well at the point of sale. But today, there are two main drivers behind smart-card technology: adding value at the POS and fraud on the Internet.

One way to add value at the POS is with loyalty programs that keep customers coming back for more. Many retailers across the United States already have loyalty programs in place, allowing customers to accrue “points” through purchases and redeem them later on. But, smart-card-based loyalty programs offer benefits that stripe or bar-code systems can’t. Magnetic stripe cards can be duped easily. Smart cards deliver a more secure solution. And, with smart cards, there’s no need to upload transaction information to a server. A chip on the card allows for real-time transactions and real-time receipts. In addition, smart cards can store the loyalty programs of up to 30 merchants, so customers don’t need to carry multiple cards.

The main reason why smart cards aren’t as popular as they could be, is that card issuers aren’t pushing them. If you put smart cards in the market, the infrastructure will follow.

What you’re doing with smart cards is distributing the database down to the chip. You’re running loyalty and gift card programs right out of the terminal, without a backend processing and tracking system.