Smart Success

Smart Cards have finally arrived in India. Of course, it would be a sacrilege to say that
India, at the forefront of IT, has been bereft of smart card usage. Think cellular phones
and SIM cards, and we land up talking about smart cards. However, apart from SIM usage
(cellular companies had no other better options), the fan following of smart card
technology is rather small. For example, even as credit cards marches northward, its smart
card variant, the debit card/epurse, is still to find acceptance in the country.

So what’s the smart card business all about? Though relatively a new technology, smart
cards have found enough takers globally. As per Gemplus figures, an estimated 900 million
smart cards are in use globally. The local estimation: about 1.5 million smart cards, with
around 95% usage in SIM category.

The technology has its historical origin in the seventies when inventors in Germany,
Japan, and France filed the original patents. Due to several factors, an important being
the immaturity of the semiconductor technology, most work on smart cards remained at
R&D level till the mid-eighties. However, in nineties an initiative by French National
Visa (for debit card) and France Telecom (for phone cards) provided the smart card
industry with high volume opportunities. And since then, there has been no looking back.

Though, still a small brother to credit card in the plastic card segment, it’s just a
matter of time before smart cards take over other forms of plastic cards. The rationale is
not hard to fathom: Smart cards offer more security, confidentiality and computational
power than any other plastic cards. Moreover, a smart card is a safe place to store
valuable information such as private keys, account numbers, passwords or any valuable
personal information.

Talk about benefits to end-users-an ability to manage or control expenditures more
effectively, fraud reduction, reduced paperwork, accessibility to multiple services with
one card and much more. So no wonder, smart cards have found enough admirers in various
fields in the global market and the volumes are expected to grow further in the coming

Indian scene
In India, the fan-following of smart card and its applications is relatively small; be it
epurse, debit card, access control, phone cards or other smart card usage. Barring a few
projects, a large number are still in pilot stage, the cellular phone segment continues to
provide the biggest volumes for smart card manufacturers. As Anil Gupta, Business Manager,
Gemplus India, says, “Currently, nearly 95% of smart card usage is in the SIM
business.” However, this may become a thing of the past after the initiatives taken
by the government of Gujarat. The Gujarat government has announced a project worth Rs63
crore, bagged by Smart Chip, to issue driving licenses on smart cards (see box). According
to Sanjay Dharwadkar, Head of System Marketing, Smart Chip, “The smart card market is
expected to get a fillip with this initiative.” Consider the numbers in Gujarat: 10
lakh licenses are issued every year and the total number of licenses in the state is close
to a crore. Of course, it would not be a cake walk for the state to implement the project.
Infrastructure problems need to be addressed to take the full benefit of the project. For
example, the 25-odd district road transport offices need to be linked with VSATs to have a
complete system in place.

However, it is expected that once the project goes on stream, it will only be a matter of
time before other state governments also jump on to the bandwagon, increasing the smart
card usage in the country. No surprise then that the smart card players are looking at the
government to develop the market. According to Dharwadkar, “In India, the biggest
market for us is the government agencies due to the sheer numbers involved.” In the
coming years, provided the government moves into the IT direction, one would see a host of
smart card applications for income-tax, PAN card and others.

This does not mean that the other organizations are reluctant to use smart cards. Be it a
school or IIT or any private organization, smart cards are increasingly finding
acceptance, though in many cases still in a pilot stage, catering to their particular
specifications. According to Leena Aparajit of The Shriram School, “We have deployed
the Smart Student Management project for maintaining attendance of teachers and
higher-class students and later on plan to incorporate other applications like canteen
bills.” IIT Mumbai has launched a pre-paid debit Smart Rupee System (SMARS) project
in its campus. Similarly, MasterCard, in alliance with Citibank, has launched `Mastero’,
an online, point-of-sale (POS) debit brand, as a pilot project in Bangalore. In other
application areas, LML, a major brand among two-wheeler manufacturers, has deployed a
smart card-based vendor net to manage just-in-time inventory systems for its plant.
Companies like HLL and Hewlett-Packard have introduced smart card-based loyalty programs.
Others like TVS Electronics and Amadeus have employee management programs on smart cards.
Similarly, after completion of a one-year pilot test, Escorts Finance is all set to
re-launch its E-card, a pre-paid cash card, with added features. Says Jayant Dang, MD,
Escorts Finance, “After gauging customer needs, we have increased the card’s capacity
from 1k to 4k and incorporated additional features into the card.” With many such
initiatives in the offing, one can look forward to a boom in the smart card market in

However, many problems and gray areas need to be addressed before we actually witness a
mass deployment of these cards. First on the list comes the rules and regulations that
call for change or alterations to factor-in technology. As Aparajit quips, “In spite
of the technology, we really cannot use smart cards for attendance, as regulations warrant
us to manually prepare the attendance record.” Similarly, a non-banking finance
company (NBFC) cannot issue debit cards as that falls under the purview of banks. And for
banks, it does not make much business sense as the money is already with them and issuing
debit cards would mean investing in infrastructure. However, for an NBFC it makes ideal
business. As Dang puts it, “We can use the float for maximizing revenues.” But
one cannot overlook the accountability factor with regard to NBFCs. Complains a manager in
a public sector bank, “With the series of frauds in NBFC segment, who will be
accountable for people’s money?” Nevertheless, the government is trying to look into
the issues related to smart card payment system with the setting up of the Saraf Committee
by the Reserve Bank of India (RBI). The SMARS project is one such initiative which is
expected to provide valuable feedback for future absorption and widespread usage of
technology in the country.

No doubt, the government is a big market for smart cards, but then worldover it is the
private sector which gets the credit for their burgeoning growth. So, privatization of
services will surely help. Worldwide, the biggest market for smart cards is phone cards.
While in India, phone cards are nowhere on the scene. Nevertheless, with the basic service
operators expected to commence operations, the market is expected to pick up. According to
Deepak Ghai, Director (Business Development), Schlumberger Measurement & Systems
(India) Ltd., “Some basic service operators are actively considering the option of
pay phones, using credit or debit cards as these are increasingly becoming a way of life.
In the years to come, the largest market in India will be the telecom market.”

However, the lack of education about smart cards and its related technology remains the
biggest problem. People are still skeptical to use smart cards. Another issue in the
expansion of this market is the cost factor, which ranges from Rs100 to Rs500 per card.
However, vendors are confident that cost wouldn’t remain that much of an issue once
volumes are big. As Dharwadkar puts it, “For the Gujarat license ID, we are confident
to have a cost of around Rs60-70, because of the volumes game.”

Smart card features give it an edge over all other existing technology/applications, be it
credit card, access control mechanism, measuring loyalty etc. But, how soon would be the
takeover? Nobody wants to take a bet, but the industry is optimistic that “it’s
soon” to have a smart card floating in every pocket.


While of the size of a conventional credit card, smart card has an electronic microchip
embedded in it. The chip stores electronic data and programs that are protected by
advanced security features. The chip can either be a microprocessor with internal memory
or a memory chip with non-programmable logic.

Contact Card: Contact smart cards must be inserted into a smart card reader. They
have a small gold plate about 1/2" in diameter on the front, instead of a magnetic
strip on the back like a credit card. When the card is inserted into a smart card reader,
it makes contact with electrical connectors that transfer data to and from the chip.

Contactless Cards: These cards have an electronic microchip and an antenna embedded
inside them. The duo allow the card to communicate with an antenna/coupler unit without
any physical contact. Contactless cards are an ideal solution when transactions need to be
processed very quickly, as in mass-transit or toll collection activities.

Hybrid Cards: This card has two chips, each with its respective contact and
contactless interface. The two chips are not connected, but for many applications, this
hybrid serves the need of consumers.

Combi Cards: Still in nascent stages, it is a single-chip card with both a contact
and contactless interface. It enables access to the same chip via a contact as well as a
contactless interface, with a very high level of security.

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