Three Canadian smart card companies have banded together to introduce a product that could equip banks to compete with the American Express Blue card.
Their iBanking chip card features a high encryption level and a flexible payment architecture. Banks can put their brand names on the card and customize it with various applications, according to the developers, who say no banks have signed up to issue iBanking yet.
The card was unveiled Wednesday in Toronto at an e-payments session during Oasis Technology Ltd.'s annual conference. Oasis, one of the product's developers, is trying to convince its clients - which include MasterCard International, Visa, American Express Co., and Citigroup Inc. - that its smart card can accommodate any business strategy.
The popularity of Amex's Blue - a see-through plastic credit card with both a magnetic stripe and a microprocessor chip - has fueled banks' interest in issuing smart cards. Blue was introduced with fanfare last summer, and, for a while, Amex could not manufacture enough cards to meet demand. Amex is selling smart card readers to Blue customers so they can use the chip for online authentication and security, and intends to introduce more uses for the chip soon.
U.S. banks have tried other ways to whet public interest in smart cards - mostly by distributing the cards as electronic purses - but these pilots did not succeed, and many banks threw up their hands. The developers of iBanking hope that their product and the example of Blue will revive interest.
For more than a year Oasis has pooled its expertise in e-payment infrastructure with the resources of the chip card company G&D Security Card Systems, the Canadian subsidiary of Giesecke & Devrient; and e-business solutions provider CIT Inc., a subsidiary of Silverline Technologies, to develop the application. All three companies are marketing the product to their respective clients.
Ashraf Dimitri, president and chief executive officer of Oasis, said the iBanking product is meant "to solve once and for all the issues of security and authentication." He predicted that financial institutions and retailers will "grab on to this really quickly" because of the potential to develop "a deep one-to-one relationship with the consumer."
Mr. Dimitri said that despite hesitation in the past about the viability of smart cards in North America, the proliferation of Internet commerce has opened up the market. While he said that iBanking "is not competing with Blue," he stressed the opportunities for the card associations and banks to get into the game. "We are a technology provider. This is a technology that banks can use."
The product uses a high-octane encryption standard known as PKI, or public key infrastructure, and it requires the presence of the card for the entire duration of the transaction. If the card is pulled out, the transaction terminates.
Mr. Dimitri said it was necessary to use a powerful encryption standard to reassure cardholders and issuers about the preemption of fraud.
"The use of smart cards as a purse or a carrier probably isn't there right now," he said. But because smart card functions will quickly expand from bill payments and Internet sales to more complicated transactions, such as managing one's entire stock portfolio, it was necessary to vouchsafe the product's security, he said.
The three companies are emphasizing iBanking's public key technology as a major selling point, but some experts say there is little demand for such a complicated infrastructure.
Gail Francolini, vice president of business development for MasterCard International's global chip group in Purchase, N.Y., said that not all banks need a standard as complex as public key infrastructure. "PKI is the cream of the crop in terms of security, but there are simpler technologies that offer the same solution," she said.
Ms. Francolini said that while fraud concerns are high in such markets as Asia, they are not as big a priority in the United States. "At this point, we don't think there needs to be one solution," she said. "We recognize that different banks will want different things."
MasterCard recently addressed the issue of disparity among its own members' needs by forming its Chip Vendor Services Program, a consortium of vendors that MasterCard members can consult during their transition from magnetic strip to microchip. Ms. Francolini said the program is a consulting service where members can pick and choose from vendors who already have an understanding of MasterCard's overall strategy.
American Express declined to comment about the new offering.
Theodore Iacobuzio, a senior analyst at TowerGroup, a consulting firm in Needham, Mass., said he does not agree with Mr. Dimitri's assessment of the U.S. chip card market. "The chip will become the world's authentication standard. That is clear. But in the U.S., it's going to be a very slow process because of the lack of a business case," he said.
Mr. Iacobuzio said it would take at least another two years before "we begin to see anything like critical mass."
