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PANORAMA: 1998

Smart Card Technology Takes Step Forward
by Laura Hughes

A "SMART CARD" scheme launched in Britain features new technology which will bring the cashless society closer to reality. The scheme, Citycard, uses technology which is designed to eliminate the need for loose change for small cash payments, such as parking fees, bus or train tickets or leisure activity charges.

Citycard technology provides consumers with the convenience of using plastic rather than searching for loose change. It also features the added benefit of a contactless card, which does not need to be inserted into a traditional reader - rather it just requires the card to be passed over the top of a reader for added speed, which is regarded as vital in these applications.

The use of plastic cards, such as Visa, MasterCard and Switch, is growing at 10 per cent plus per annum. Plastic cards are used for more than three billion pounds sterling of payments in the United Kingdom each year.

This however only accounts for a small proportion of all consumer transactions. Despite the increasing popularity and convenience of plastic payments the majority of the remaining transactions are of too low value to use existing cards. The existing credit card infrastructure, for example, can not profitably handle transactions under 25 pounds sterling.

Global payment schemes are now keen to expand into lower value payment segments. This opens up whole new areas for cashless payment such as self service and Internet transactions, with completely new volume and risk profiles which established payment networks were never designed to handle.

Even recent trials of electronic purse schemes, such as Proton or Mondex, have not been successful in handling small transactions. Future worldwide electronic purse initiatives, like VisaCash, will encompass Citycard technology to enable the lower value transactions to be added.

The Citycard technology also includes the first comprehensive data transfer and clearing system designed to support local schemes for the accurate allocation of costs and revenues between multiple card issuers and acceptors. Growth of Smart Cards Smart cards are growing in popularity worldwide.

More secure than conventional magnetic stripe cards, smart cards contain a small embedded computer chip that enables the card to store more information. In France smart cards are used for payphones and bank cards, in Germany they are used for national insurance and medical records.

In the UK many new retailer loyalty schemes, like the Shell reward scheme, use smart cards and the UK banks are set to start replacing existing magnetic stripe plastic bank, debit and credit cards with smart cards during 1998.

Rather than increase the plethora of plastic cards in everyone's wallet or purse, smart card technology with the ability to store more information on one card, offers the opportunity to develop multi-application cards. This has been central to the development of Citycard technology: the vision of one card with many uses.

Multiple applications, ranging from electronic purse or storage of membership details or passes and season tickets for transport, parking, leisure, libraries, housing benefits and retailer loyalty can be stored within one smart Citycard.

The Herts Smart Scheme is the first UK application of Citycard technology. It has been pioneered by a partnership of Transmo Citycard, a technology service provider based in Royston, Hertfordshire (southern England), the Hertfordshire County Council and The Shires, the county's largest bus company.

The first phase of the Herts Smart Scheme involves bus travel. Bus travel was identified as the key application within the region and provides a self-financing framework for county-wide travel, parking and other local services to be added to the Citycard. It is expected that the scheme will be county-wide by the year 2000. Many other local authorities and cities are also poised to follow the Hertfordshire example.

As part of phase one of the scheme children at schools in Hemel Hempstead, southern England, have been issued with smart cards instead of cardboard free bus passes. Frequent use fare discount cards for students are also being converted to smart cards.

Hertfordshire County Council (HCC), in southern England, will be extending the scheme throughout 1998, issuing approximately 30,000 cards. Local companies are being encouraged to issue staff with discount cards as part of the Business TravelWise initiative, a scheme to encourage businesses to bring forward measures to cut down peak time travel congestion. Discussions are also underway to issue cards to the elderly and disabled.

The Herts Smart Scheme was already being installed when British Deputy Prime Minister John Prescott's vision for a truly integrated transport revolution in the UK was published, in the document Developing and Integrated Transport Policy.

The scheme shows how electronic card technology can be used to achieve the vision for Mr Prescott, who is also Secretary of State for the Environment, Transport and the Regions. It works with local government and transport operators to develop an integrated transport system.

''We are delighted to be involved in such a pioneering scheme, and confidently expect major cities to follow suit,'' said Spencer Robeson, head of the passenger transport unit at HCC. How the scheme works: A smart card is rather like a sophisticated credit card or phone card, with a computer chip hidden inside. This enables the card to store information about where and when the pupils are entitled to travel.

The smart cards in the Herts Smart Scheme carry a digitised identification photograph, a name, a pass number and issuer. The chip on the cards is encoded with ID details issue, term and authorised journey.

The Shires buses have been fitted with a smart pass reader which is integrated into the ticketing machine. The user simply passes the card over the top of the reader on the top of the ticketing machine and it is read instantly.

Every payment terminal is also fitted with a TSM, or Transmo Security Module. This module, in the form of a small printed circuit board, captures an independent audit of card transactions. It relays information back to the Transmo Clearing Centre, where the data is processed.

This pioneering technology gives the scheme a comprehensive clearing and payment infrastructure, allowing it to allocate costs and revenues. It enables HCC to control the use of the pass for authorised journeys, allocate accurate reimbursements to The Shires on a journeys-made basis and allocate reimbursed costs of those journeys to the District Council responsible for the pass holders. It will also help planning the allocation of subsidised routes.

Further benefits include user-friendly, fast and easy card handling, savings in scheme administration costs and reduced loss from pass abuse and statistical data collection on frequency of use.

John Batten, Managing Director, Transmo Citycard, Unit 1
The Maltings, Green Drift, Royston, Hertfordshire, United Kingdom, SG8 5YD
Telephone: +44 1763 249933
Fax: +44 1763 249955

Spencer Robeson
Hertfordshire County Council
Telephone: +44 1992 588656

Nigel Eggleton
The Shires
Telephone: +44 1923 682262

Elizabeth Grindlay/ Becky Green/ Fiona Armstrong at icas public relations
Telephone: +44 1442 261199
Fax +44 1442 236401
E-mail: fiona@icas.co.uk