NW_20010701_en_Card Technology, July 1, 2001_ “A Not-So-Perfect Fit”

With one bold stroke in the fall of 1999, American Express seemed to cut through one of the biggest obstacles to the wider use of smart cards: The fact that there are few terminals to read them. By offering consumers who signed up for the new chip-based Blue credit card free smart card readers for their personal computers, AmEx appeared to be creating an instant network of devices that could read smart cards.

Many consumers responded to the offer, and AmEx sent out hundreds of thousands of readers, according to Atlanta-based Brittain & Associates, which studied the Blue card program. But, once the euphoria faded, it turned out that very few–fewer than 5%–of Blue cardholders actually had smart card readers plugged into their PCs, and fewer used them. Many found no reason to go to the trouble, while others found they could not install the reader or that reader software interfered with other programs

Other issuers want to use smart cards, but not readers. One example is Rabobank, based in Utrecht, the Netherlands.

Since 1989, Rabobank has offered small business customers a smart card and card reader for remote banking, and 110,000 customers now use the service says Bert Willems, head of telebanking at Rabobank. Meanwhile, 785,000, retail customers identify themselves to the bank by using a Digipass 500 device from Vasco Data Security, based in Brussels and Chicago.

The Digipass 500 is personalized for each customer, and generates a random number for each transaction. The customer enters the number into their PC and the bank uses it to verify the customer’s identity. Similar tokens are available from other vendors.

The bank planned to launch last month a new way of identifying retail customers, and has ordered 300,000 Digipass 800 devices that use a smart card. The customer inserts his or her smart card into the device, which generates a one-time number based on the digital certificate on the card. The customer then keys in the number to access his or her bank accounts.

The biggest reason for using the Digipass 800 over a smart card reader, Willems says, is that it allows consumers to get to the bank through many devices–including cell phones and handheld computers–not just through a PC with a card reader.

He says the Digipass 800 has the advantage over the 500 that it uses the same smart card for customer identification that consumers already use as a debit card. The 800 also is cheaper because it uses the digital credentials stored on the smart card, and thus does not need to be personalized. Willems says the bank will pay below $10 apiece for the Digipass 800, compared with about $15 for the 500.

While it was not the primary reason for choosing the Digipass over smart card readers for retail customers, Willems says small business customers have found card readers complex to install. “Some were able to do the installation themselves, while others had to hire a company to install the reader,” he says.

Gradually the reader installation issue will fade. What will not fade is the challenge for issuers to offer consumers applications compelling enough to make them plug in their card readers and use their smart cards.