Smart cards enter everyday world

By PETER GRIFFIN

If you believe the spin, "chip-embedded" credit cards will soon be managing everything from our bank accounts to gym memberships - and we are not worried about their potential to breach privacy.

Vipin Kalra, Visa's head of chip cards for Australia and New Zealand, said the country's traditional aversion to "smart-cards" had waned.

"Our research shows the concept of the smart card does not actually pose a concern in this part of the world."

Mr Kalra said information on the card user would continue to be stored by individual merchants, not in one central location.

ANZ last week became the first of the big banks to offer a chip card - Visa "Zed" - to customers.

The cards store information about users' shopping habits and ANZ says they will, finally, make buying online a safe option.

Mr Kalra said Australasian consumers liked the idea of replacing the many banking and membership cards with a single chip card. Merchants were happy to share infrastructure and to cheaply implement card-based rewards programmes.

Moving beyond the credit card, he said, passenger transport and health insurance were areas where the cards could take on fresh uses.

Mr Kalra said information could potentially be carried for dozens of merchants and organisations equipped with terminals capable of reading the cards.

The 16kb and 32kb cards now available had memory capacity to store large amounts of data.

He said part of the reason for a big push in chip cards was that the cost of producing them had fallen dramatically - from $US6 ($14.40) 18 months ago to around $US3 today.

And, after years of waiting to see which standard would win out, banks were finally willing to make investments in infrastructure to support chip cards.

ANZ would make an infrastructure investment of about $70 million in the Australasian region to usher in the cards.

Thirty thousand terminals capable of reading the cards would be delivered to retailers over the next year.

In the "physical world" of credit transactions, chip cards would eventually eliminate "skimming", the fraudster's technique of obtaining information from a credit card's magnetic strip.

"The card tells whether the merchant and card user are authentic and that the 'issuer' is not a hacker at the end of a telephone line," said Mr Kalra.

But the real advantages would come in the world of e-commerce, where credit card fraud was at its worst.

Buying goods from an online retailer, a Zed card user would enter a password through his or her web browser and swipe the card, using the USB or serial Zed card reader which ANZ was initially issuing free with the chip cards.

The card reader verified that both the card and its owner were present at the point of purchase.

Online merchants were already beginning to upgrade their sites to cope with the payment method.

So far, ANZ is the only bank to commit itself to the new technology, but Visa is confident that another local bank will take it up in the next few months.

Mr Kalra said French banks started issuing chip cards about seven years ago, leading to a drop in credit-card fraud of more than 90 per cent.

All Visa cards would carry chips within three to five years.

The chip cards formed the main part of the company's new security standard for e-commerce, which Visa wanted all banks to support by 2003.

zed.co.nz