The boom in wireless communications has smart-card manufacturers hopping.
Hungry for growth and finding little in basic stored value services for the financial industry, system vendors are converging on GSM-the Global System for Mobile communications standard that rules the European digital cell phone market and is making inroads in North America.
Product announcements and electronic commerce applications were legion at recent international conferences such as Smart Card '99 in London, Wireless '99 in New Orleans, and the GSM World Congress in Cannes, France.
Several companies went so far as to introduce remote banking services relying on the card as a security device as well as a store of information. If a smart card does not sell itself for banking alone, then- combined with wireless telephony - it looks to some like a killer app.
"Cellular telecommunications is a key area in which smart cards can add value," Ovum Ltd., a London-based research firm, said in a 1998 report on the chip card market.
"For the first time, a mobile phone can act just like an automated teller machine, providing electronic cash and other information to consumers quickly and easily," said Gaylon Howe, senior vice president of chip products at Visa International, which recently completed its first download of Visa Cash through a GSM phone.
That is only part of what Postgirot Bank of Sweden has in mind for a GSM-based service that runs the gamut from basic banking to trading to any number of the multiple applications that smart card chips are capable of handling.
The telecommunications giant Ericsson is incorporating Postgirot technology into its wireless e-commerce offerings.
Postgirot Bank "will use the solution for our mobile e-Postgiro service," said Bengt Mandell, who is responsible for business support at the bank. "A key user benefit is the simplicity in accessing account information and bills-you can basically do it anywhere and at any time within the GSM service area."
Postgirot customers are no strangers to card-activated remote banking. They have been using smart cards and randomly generated data encryption codes for several years in banking via personal computer.
The principal difference with GSM, Postgirot said, "is that the mobile phone becomes the only device customers need."
Phone companies such as Ericsson, British Telecom, and France Telecom are aggressively developing wireless commerce services.
The Visa Cash program, Proton World International, and MasterCard International's Mondex organization, with its Multos multiple-application operating system, are all leading their bank participants down this path.
And major chip card and systems vendors such as Gemplus and Schlumberger have underlined the strategic importance of producing the cards that fit into phones and authenticate the users. Orga, a German chip card producer, has proclaimed a goal of surpassing those competitors to be No. 1 in GSM cards.
In GSM terminology, smart cards are SIMs-subscriber identity modules. That means GSM "is a key market for smart card security," Ovum Ltd. said in its report last year. The SIM carries data about the subscriber and is inserted into the phone before it is used.
But the card can be much more than that.
Wireless technologies "surpass mere voice and data capabilities," said Bernard Guidon, senior vice president and general manager of Hewlett- Packard Co.'s communications industry business unit.
"As well as the obvious point that every GSM digital mobile phone requires a smart card, we also see a new trend emerging in the shape of the mobile phone with two card slots," said David Jones, co-author of a recent report on smart cards published by SJB Research of Langport, England.
"Since it is becoming so widely accepted as a remote terminal for telephony, there is a good chance that GSM phones will become widely accepted as a remote terminal for banking and virtual shopping," Mr. Jones said.
"Value-added services are critical to the future of mobile communications operators, and at this early stage of the market it is important that we are able to react quickly and optimize our offerings to suit the customer base," said Gerhard Mayrhofer, head of mobile product marketing for Viag Interkom, a German network company.
He said it is essential to find partners that "can provide end-to-end technology to rapidly implement our ideas for new services" - in Viag's case, Schlumberger Smart Cards and Terminals.
"Wireless communications technology is making it possible to create a new generation of portable, intelligent tools for business and leisure applications," said Robert Lezec, Schlumberger's vice president of mobile communications solutions.
The possibilities for banking and electronic commerce have been recognized and remarked upon for several years.
As of mid-1997, the GSM market was relatively unformed, with about 44 million customers worldwide and 600,000 of them in the United States and Canada, according to the North American GSM Alliance.
But now there are an estimated 120 million worldwide-expected to top 200 million next year-and three million in North America. The GSM community is regarded as an attractive market and not just a segment of a wireless phone industry fragmented by conflicting technical standards.
SJB Research said it views mobile communications as one of at least three new waves of chip card growth.
The others are Combi-cards-which can be used both in conventional transaction terminals and in contactless mode for transportation fares and tolls-and subscriber authentication devices for pay and satellite television.
Ovum pointed out that in addition to GSM, DCS-1800 and PCS-1900 phone standards also accommodate chip cards. Schlumberger, which has its North American smart card center in San Jose, Calif., said it has developed "the first full suite of products" for PCS-1900 value-added services.
Stockholm-based Ericsson has reached across to Pacific Bell Wireless and the University of California's computer science department in Berkeley to devise a "GSM on the Net" trial for the second quarter.
"Once fully developed and deployed, it will ensure local and global mobility, multimedia capabilities, and advanced Internet protocol applications for businesses and other group users," said Ericsson marketing manager Bengt-Ake Ljuden.
In the United Kingdom, Barclays Bank and Cellnet about two years ago began delivering credit card account information to GSM phones. Gemplus and Alcatel of France also worked on that project.
Mondex International joined Cellnet in September 1997 to announce joint development of a digital cash downloading service to "turn the mobile phone into a personal cash machine."
Flash forward to February 1999: Barclays' Barclaycard unit was involved in the Visa International announcement of Feb. 22, and British Telecom was demonstrating a digital identification service on the Multos operating system.
In Leeds, England, the locale for one of Visa's 62 electronic cash projects, Barclaycard said it will make a GSM-based cash-loading service available to 1,000 customers.
Still working with Cellnet, Barclaycard is using customized Motorola Startac D phones with two card slots, SIM cards from De La Rue Card Systems, and Logica PLC's m-Commerce server.
Motorola, De La Rue, and Logica were vying with other groups for GSM attention last October at the Cartes '98 exposition in Paris, where "mobile commerce" emerged as a major discussion topic. Logica projected "m- Commerce" would total $4.5 billion next year in Europe.
Gemplus, Alcatel, and Mondex International were together at Cartes '98 with their version of "an ATM in your pocket." Gemplus also reported that several service providers were adopting its SIM cards for the Iridium low- altitude satellite network, which is now struggling a bit to bring its universal phone service to market.
Underscoring its commitment to this type of smart card, Gemplus said GSM is a priority for its recently created software group.
Lloyd Daniels, senior manager for new products and ventures at Mondex in London, said he agreed that GSM is all the rage, but he cautioned against treating it as just one in a series of "next big things."
"A couple of years ago it was multimedia, now it's GSM," he said. "It used to be e-commerce, now it's GSM within e-commerce, and mobile commerce is the rage."
"GSM does represent a new channel," he said, "and all those channels will exist, some developed and preferred more by different people. That is why we put so much effort into making Mondex generic and global-it can run in any of these channels without having to reengineer."
Also getting into the GSM act in recent weeks was France Telecom, with its Itineris network. With Motorola and De La Rue, it is testing a credit card transaction service, conforming to the on-line security specifications of the national bank card consortium Cartes Bancaires.
Itineris, which already includes a text-to-voice e-mail service, is also being extended with what is said to be the first European test of the security protocol known as WAP-Wireless Application Protocol. Beginning with several hundred trial users in April, it is to include banking among other interactive capabilities such as news, weather reports, directories, and travel routing.
The ever-present De La Rue teamed up with Hewlett-Packard's Verifone subsidiary last month for a GSM version of the Verismart operating platform.
The companies said the De La Rue SIMphonIC (IC stands for integrated circuit) development kit and Verismart GSM server, programmed according to Java Card and European Telecommunications Standards Institute specifications, "will allow full interoperability between GSM appPLCations, SIMs, and handsets."
"The open, standardized technology is driving GSM to new levels by enabling advanced features and vastly increased security," said Mr. Guidon of Hewlett-Packard.
"In addition to serving traditional markets," he said, the technology "is key to delivering full mobile purchasing and e-commerce capabilities while driving mobile communication to a new class of service."
Schlumberger made its SIM card ambitions clear with a flurry of announcements, including Cyberflex Simera 32, the first card of this type based on the Java Card 2.0 standard with 32K of memory capacity.
The company said the card is ideally suited for multiple applications- the space available for banking, mobile commerce, and the like has tripled- and for the loading, updating, or removal of applets that is a hallmark of Sun Microsystems Inc.'s Java technology.
Schlumberger also came out with the Activa SIM card, which enables programs in the chips to be activated in a personalized way in the customers' handsets, and a developers' kit called SIMnario. All are compliant with GSM Phase 2+ standards.
Schlumberger, too, was able to point to a live banking service, a joint effort of American Express Bank and Hutchison Telecommunications (Hong Kong) Ltd.
Subscribers to the latter's Orange GSM service with Activa SIM cards can check balances, transfer money between accounts, and pay credit card bills. Hutchison and Schlumberger collaborated previously on Orange Info, a mobile information service, which led to "Mobile Phone Banking."
It is "consumer friendly and fits the fast-paced lifestyle of Hong Kong," said Alan Tsang, American Express Bank's general manager of personal financial services there. Customers get access to banking services "anytime and anyplace they want."
