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2Smart Cards & ecommerce

Perceptions

Were Solution looking for a problem Expensive and inflexible

The breakthrough!

Platform for new services Cost-effective and very flexible

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3Smart Cards & ecommerce

Interface Trends

Platforms Attended POS Unattended POS Remote POS

Interfaces Contact Contactless Combination

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4Smart cards & ecommerce

Functionality

Value management – e.g. EMV, e-purse

Identity or reputation management – digital ID

…locally or remotely

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5Smart Cards & ecommerce

Key Attributes

Secure (or economically secure)

Easy to operate

Standards – terminals, drivers, specifications e.g. PKCS#11, PC/SC, EMV, CEPS

Portable

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6Smart Cards & ecommerce

Multi Channel Access

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7Smart cards in ecommerce

Market Forecasts

Source – Frost and Sullivan

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8Smart cards in ecommerce

Frost & Sullivan, - The Asian smart card market will soar to new heights, especially in mainland China where the technology is expected to penetrate a slew of applications.

IDC, Industry Trends 02/12/00 - China "already appears as the single most promising market for the coming years".

Frost & Sullivan - A Look at the Asian Pacific Smart Card Market, 1999 and Beyond - “by 2004, Asia will command at least a quarter of the revenue market shares worldwide, with China by itself

commanding nearly a third of market.”

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9Smart cards in ecommerce

The new card business

One-to-One Past – every smart card application had to be lovingly hand crafted in assembler for a specific chip and OS combination

Many-to-Many future – standard smart card apps can be added or deleted, moved from one card to another because the chips are running standard multi-app OS’s that any developer can write code for.

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10Smart cards in ecommerce

New smart card “Food Chain”

Chip manufacturer Card fabricator OS provider Application developers Card Issuer and designer and personaliser Application issuers Application managers or service providers Card managers

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11Smart cards in ecommerce

Applications

Market Segment 1997 millions

2003 millions

Yearly Growth

Phonecards 684 3,270 30%

GSM 69 760 49%

Banking 49 690 55%

Loyalty 22 320 56%

Healthcare 16 210 54%

Pay TV 12 150 52%

Ticketing 8 240 77%

Gaming 2 70 78%

Access Control 10 260 72%

Identity 2 50 71%

IT General 1 120 142%

Other 24 170 38%

Total 900 6,310 38%

Gemplus figures – (Proton Report, Sept 2000)

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13Smart cards in ecommerce

Amex Blue

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XII World Productivity Congress 2001

Heading for a Coinless Society with Octopus ?

Rob NobleCEO Creative Star Ltd7th November 2001

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Contents

Octopus Progress Todate

Future Projects Being Pursued

Hong Kong Becoming Coinless?

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What Is The Octopus?

A pre-paid stored value card utilizing contactless smart card technology

Operates within wallet/purse for up to 10cm

Less than 1/3 second transaction time

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Establishing the Octopus Card Base

6.8M inhabitants living in high density corridors

Low car ownership (15%)

Nearly 11 million public transport rides per day

Potential for one public transport card to reach all economically active people

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Formation of Creative Star

In 1994 a joint venture company, Creative Star, was formed by the 5 major public transport operators

Octopus card launched in September 1997

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Octopus Usage

Currently 97% of total Octopus transactions on public transport

Nearly 90% of railway passengers using Octopus

Some 80 service providers accepting Octopus

Now expanding further into private transport/non-transport

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Octopus Applications

Public Transport and related

3 railways, 6000 buses, ferries, Peak Tram, Tramways, public light bus

Car parks

Parking meters

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Octopus in Off-Street Car Parks

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Octopus Applications

Retail

Fast food

Cake shops

Convenience stores

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Octopus Applications

Unattended businesses

Vending machines

Payphones at MTR stations

Photocopiers

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Octopus Applications

Recreational facilities Public swimming pools Racecourses

Non-payment service Access Control for residential estates School Attendance

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Add Value Service Add value service available at:

Ticket Offices/Customer Service Centres

Add Value Machines

Retail outlets which accept Octopus for payments

Maxim’s fast food and cake shops

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Add Value Service (cont’d)

Automatic Add Value Service with banks

$250 added next use after $0 or negative value

Save queuing time for adding value

No worries about insufficient cash

Available at nine banks so far

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Future Projects Being Pursued

Extend use of Octopus as access control device

Extend use of Octopus as identity card

Extend use of Octopus cards in schools

Introduce Octopus across the border in Shenzhen

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Future Projects Being Pursued (cont’d)

Combined Octopus/hotel room key

Combined Octopus/credit card with AAVS

Octopus mobile phones and key fobs

Home personal readers for web micro-payments

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Video Clips of Road Runner

Railway

Bus

Retail

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Hong Kong Becoming Coinless?

Virtually everyone in Hong Kong has an Octopus

Already used extensively for public transport

Being readily adopted for private transport/ unattended environments

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Hong Kong Becoming Coinless? (cont’d)

Soon a critical mass of manned payment SPs and cardholders thinking of retail payments

CS pursuing many new Octopus projects

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Hong Kong Becoming Coinless? (cont’d)

Big savings for operators if coinless Virtuous circle, more SPs and fewer

coins Customers prefer Octopus to heavy,

dirty, slower-transaction coins Large productivity gains if electronic

transactions replace physical coins

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Hong Kong Becoming Coinless? (cont’d)

Coins been around for some 2500 years

Still some HK$6b worth of coins circulating

Real chance world-leading Octopus can help Hong Kong to become first coinless city

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Hong Kong Smart Cards Octopus

8 million cards, 9000 readers 7 million transactions/day

Visacash ComPass Visa (VME) Mondex GSM SIM ePark

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Octopus Transaction time < 300 milliseconds Transaction fees: HK$0.02 + 0.75%

$10 transaction costs $0.095 (0.95%) Applications

Transit Telephones Road tolls Point-of-sale Access control

Anonymous / personalized How does money get to service providers?

Net settlement system operated by Creative Star

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Entities of the E-payment System

Purse Charger

(Bank or third party)

Identification Card Issuer

(Corporate or Service Provider)

Card Holder

(User)

Access Control/E-payment terminal•.Corporate secure Log in

•.Retail POS

•collecting Highway tax

Corporate Information Center

(Database)

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Octopus System

SOURCE: WORLD BANK

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Smart Card Sales Leaders (2000)

VENDOR # OF CARDS SHARE

Gemplus 185,000,000 29%

Schlumberger 152,000,000 24%

Oberthur Smart Cards 85,000,000 14%

Giesecke & Devrient 76,000,000 12%

Orga Card Systems 53,000,000 8%

TOTAL 628,000,000SOURCE: CARDWEB.COM

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Mondex Security Active and dormant security software

Security methods constantly changing ITSEC E6 level (military)

VTP (Value Transfer Protocol) Globally unique card numbers Globally unique transaction numbers Challenge-response user identification Digital signatures

MULTOS operating system firewalls on the chip

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Payment Cards 8-128 Kb Data rate 115 Kb/sec ISO 7816 compliant Visa-certified PIN management and verification 3DES algorithm for authentication, secure

messaging Epurse with payment command set (debit,

credit, balance, floor limit management)SOURCE: GEMPLUS

EMV =EUROPAY INT’L,MASTERCARD,VISA

MPCOS =MULTI PAYMENT CHIPOPERATING SYSTEM

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Wireless Card Authorization

SOURCE: SAMSUNG

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Mondex

Smart-card-based, stored-value card (SVC) Subsidiary of MasterCard NatWest (National Westminister Bank, UK) et al. Secret chip-to-chip transfer protocol Value is not in strings alone; must be on Mondex

card Loaded through ATM

ATM does not know transfer protocol; connects with secure device at bank

Spending at merchants having a Mondex value transfer terminal

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Mondex Components (Hitachi)

Cashless ATM Electronic Cash RegisterPCMCIA Reader/Writer

ElectronicWallet

Key FobBalanceReader

SOURCE: HITACHI

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The National Bank of Kuwait (NBK) has launched the world’s first Visa internet-only payment card program in Kuwait city

Features of NBK card include: preset spending limits, automatic insurance from NBK for all purchases using the card

.

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Smart Cards Will Play an Important Role In Ecommerce:

Provide a secure storage for digital certificates and personal identification

Convenience-Multifunction Card like the JAVA Card and very portable

Log recent activities Can Provide automatic Logins to designated

websites without having to remember passwords and login procedures

Suitable for payment over the internet

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Conclusion

Ecommerce will take off in Asia Smart Card will play an important

role in ecommerce Security is an important issue and

the smart card will add value to it Ecommerce will go wireless Asia has the highest growth rate of

smart card usage in the world