The market for credit cards and private label cards is growing rapidly. Within the last years, significant growth rates were achieved concerning the total number of issued cards, the density of merchant acceptance points and the number of functions and applications positioned on a card. In particular the replacement of magnetic stripe cards by chip cards, which will be finished until 2005, will create new business areas for which new innovative concepts are needed. The international EMV Standard from Europay/MasterCard and VISA will play a major role regarding these topics.

Card based payment transactions

Over the years various kinds of card based payment applications have established in the market of banks and financial service providers:

• credit cards: MasterCard, VISA, AMEX, DinersClub, JCB
• debit cards: electronic Cash, POZ/ELV, Maestro, VISA Electron
• virtual purses: GeldKarte, Clip
• stored value cards: paysafecard, MicroMoney

ePayments

The use of card payment via Internet or mobile devices (mobiles, PDAs, Smartphones) opens a wide range covering all customer channels. In contrast to payments designed for the internet only, the credit card companies have established international clearing networks and possess an enormous customer base. This represents an ideal starting point to expand their business by the new channel internet. After SET™ (Secure Electronic Transaction) having been rejected by the market because of its complexity and lack of ease of use, the big credit card companies VISA and MasterCard came up with sophisticated concepts to adapt secure online card payments. Both, Verified by VISA (3D Secure) and MasterCard SPA/UCAF, use the so called Wallet-Server concept, where the cardholder is identified by the issuer during the purchase transaction.

Identification

For sure payment is the most important function by now, but cards can be used for many more applications. The ongoing technological development enabled the production of chip cards possessing their own on card processor and thus representing a kind of mini-computer. Based on this technology, digital signature cards can be used as electronic id cards to identify the card owner. Thus, the new market of access control can be entered representing physical access to buildings as well as virtual access to portals or online platforms. Again, the credit card companies take the leadership in the standardisation process of chip cards and, with the EMV standard, have created the fundament of an international ID-card functionality already today.

Signature

As electronic signatures are based on the same cryptographic and technical algorithms as identification mechanisms, an additional application for chip cards arises. Chip cards can be used as a medium for legally binding signatures, e.g. compatible to the German signature law. A lot of new applications can be provided in conjunction with digital signatures. Almost every legal contract requiring to be physically signed in the past could be digitised and rationalised using this technology.

Loyalty programs

In a distinctive information society customer retention comes to the fore. As in the internet the competitor is just the much cited mouse click away, procedures are required for customer retention. The ideal basis for loyalty programs are cards, too, as shown by the success of Miles&More cards from German Lufthansa.

Value added services

Chip cards can also be used as simple storage cards, which generate the possibility of various value added services for these cards such as ticketing. These functions in combination with a virtual purse have been tested in Germany already within some pilot projects. These projects show the potential and versatility of chip cards.

Use NOVOSEC's expertise in card related projects! Our offering comprises detailed know-how about business models to the handling via clearing systems using international standards such as GICC, ISO8583, SWIFT.