April 1997 The Future Looks Bright for Smart Cards

Smart cards -- shaped and sized like a standard credit card but featuring an embedded microcontroller -- are capable of holding up to 500 times more data than traditional magnetic stripe cards. According to market research firm Frost & Sullivan (Mountain View, Calif.), the world smart card market is creating high growth markets in regions not traditionally marketed for technological advances.

The opportunities for growth in the smart cards market include such disparate areas as: electronic commerce, pay-TV subscription, university cards, wireless telecommunications, laundro-mats, automatic fare collection booths and banking. According to semiconductor analyst Alyxia Do, "The key characteristic of all smart cards is their enabling of higher security standards and offering greater multi-functionality than provided by a traditional technology such as magnetic stripes."

But a threat to this technological advance is the consumer concern for the loss of privacy and a potential Big Brother scenario. Who gets access to the information is a issue on the minds of the consumer. For example, will your doctor be able to access your financial records?

Frost & Sullivan's research also forecasts patterns of the technological migrations among the different smart card product segments of the token memory, wired logic and microcontroller cards. Token memory cards can be used as pre-paid phone cards and pre-paid debit cards, applications which represent the bulk of the market. But there are technologies that are being developed that are leading to the replacement of token memory cards.

Contactless cards are also driving a secondary migration. This is a contactless card which does not require a connection with a terminal and uses radio frequency transmissions for transactions. This application is one of the largest in the market and it has the greatest potential to take over the token memory card segment, Frost & Sullivan believes.

In Europe, the microcontroller card has been well established, but this is expected to change with the increased penetration of smart cards in the Asia Pacific, Latin American and North American regions. These regions are forecasted for tremendous growth.