The history of Smart card and its china market developing trends
2008-08-19

                                                        The history of Smart card and its china market developing trends       A Smart Card is a plastic card of the size of a credit card with an integrated circuit built into it, which enable the holder to purchase goods and services, enter restricted areas, access medical, financial, or other records, or perform other operations requiring data stored on the chip.       Actually Smart Card has a not very long history of a full 40 years.       The automated chip card was invented by German rocket scientist Helmut Gröttrup and his colleague Jürgen Dethloff in 1968; the patent was finally approved in 1982. The first mass use of the cards was for payment in French pay phones, starting in 1983.       Roland Moreno actually patented his first concept of the memory card in 1974. In 1977, Michel Ugon from Honeywell Bull invented the first microprocessor smart card. In 1978, Bull patented the SPOM (Self Programmable One-chip Microcomputer) that defines the necessary architecture to auto-program the chip. Three years later, the very first "CP8" based on this patent was produced by Motorola. At that time, Bull had 1200 patents related to smart cards. In 2001, Bull sold its CP8 Division together all its patents to Schlumberger. Schlumberger combined its smart card department and CP8 and created Axalto. In 2006, Axalto and Gemplus, at the time the world's no.2 and no.1 smart card manufacturers, merged and became Gemalto.       The second use was with the integration of microchips into all French debit cards (Carte Bleue) completed in 1992. When paying in France with a Carte Bleue, one inserts the card into the merchant's terminal, and then types the PIN, before the transaction is accepted. Only very limited transactions (such as paying small auto route tolls) are accepted without PIN.       The major boom in smart card use came in the 1990s, with the introduction of the smart-card-based SIM used in GSM mobile phone equipment in Europe. With the ubiquity of mobile phones in Europe, smart cards have become very common.       The international payment brands MasterCard, Visa, and Europay agreed in 1993 to work together to develop the specifications for the use of smart cards in payment cards used as either a debit or a credit card. The first version of the EMV system was released in 1994. In 1998 a stable release of the specifications was available. EMVco, the company responsible for the long-term maintenance of the system, upgraded the specification in 2000 and most recently in 2004. The goal of EMVco, is to assure the various financial institutions and retailers that the specifications retain backward compatibility with the 1998 version.       The backers of EMV claim it is a paradigm shift in the way one looks at payment systems. In countries where banks do not currently offer a single card capable of supporting multiple account types, there may be merit to this statement. Though some banks in these countries are considering issuing one card that will serve as both a debit card and as a credit card, the business justification for this is still quite elusive. Within EMV a concept called Application Selection defines how the consumer selects which means of payment to employ for that purchase at the point of sale.       Smart cards with contact less interfaces are becoming increasingly popular for payment and ticketing applications such as mass transit. Visa and MasterCard have agreed to an easy-to-implement version currently being deployed (2004-2006) in the USA. Across the globe, contacts less fare collection systems are being implemented to drive efficiencies in public transit. The various standards emerging are local in focus and are not compatible, though the MIFARE Standard card from Philips has a considerable market share in the US and Europe.       Smart cards are also having been introduced in personal identification and entitlement schemes at regional, national, and international levels. Citizen cards, drivers’ icenses, and patient card schemes are becoming more prevalent.       A study by Chinese research and consulting firm suggests that smart card sales in China are down slightly compared to last year, but it is not impact demonic market's rapid developing.       In 2007, despite increased sales volume, China's smart card experienced a notable slowdown from 2006. Mobile phone cards remained the primary impetus for the market. To some extent, the upgrade of mobile phone cards alleviated the situation whereby increased output did not result in increased sales revenue seen in 2006. In non-telecom application fields, there are numerous types of cards, which causes inconvenience in use.       To address this issue, the government is pursuing the policy of unified standards. The trend of multifunction cards is becoming increasingly notable. China looks ready to become a global leader in other smart card markets as well.       Next year, the government plans to launch the world's largest ID card project, ultimately issuing contact less chip cards to 900 million citizens over age 16. The country is the second-largest user of chip cards to pay mass transit fares, and seems likely to lead in this market, too, with more than 40 cities rolling out chip-based fare cards.       And Chinese banks, though lagging behind many of their counterparts in Europe and Asia, this year took an initial step toward converting their massive base of bank cards-which are still little used at the point-of-sale-to smart cards complying with international standards.       All this is not to mention the tens of millions of pay-TV smart cards that digital cable television networks plan to roll out over the next five years and continued expansion of chip-based social benefits cards across the country.       Not surprisingly, with a smart-card market this large, what happens here is beginning to send ripples throughout the rest of the smart card industry. And, as China's demand for smart cards grows, its influence will, too.       The Chinese smart card market is akin to the PC market in the United States, says Olivier Piou, president of France-based smart card vendor Axalto, formerly Schlumberger. "The U.S. is the first market for PCs; do you think a change in consumers' patterns in the U.S. affects what happens in the rest of the world? The answer is yes.       It means demand from big Chinese customers can determine when or even if new products get developed.