Smart card market on an uptrend


BANKING and retail applications for the smart card market in Malaysia is on an upward trend. According to a recent study by Frost and Sullivan in 2000, banking and retail applications accounted for 2.4% of total smart card shipment by application and this is expected to grow to 6.2% by 2004. 

However, Smart Card and Auto ID regional research analyst with Frost & Sullivan Asia Pacific, Jafizwaty Ishahak said magnetic stripe card technology was still prevalent in the banking sector in Malaysia. 

“Many banks are still reluctant to chip-enable their current system and automated teller machines (ATMs) due to high initial investment. How- ever, with increasing card fraud, banks have begun adopting smart card technology to increase card security and add value to their services,” she said. 

Last Friday, 12 domestic banks launched the Bankcard, the new chip-based multipurpose card to replace the existing magnetic stripe ATM cards. 

The full conversion to the Bankcard is targeted for the end of June this year. So far, 400,000 Bankcards have been issued and more than 3,800 ATMs nationwide have been fully upgraded to facilitate total chip-based ATM transactions. 

The Bankcard offers access to three payment applications: the ATM, electronic debit point-of-sale and electronic storage of monetary value. 

Jafizwaty said it was forecasted that one in every three payments would be made on card (credit and debit cards) by 2006 in the Asia-Pacific region. 

Branded credit card companies such as VISA and MasterCard are also coming up with their own smart card solutions to gain support from their member banks. 

MasterCard has its own chip solution package and VISA is expected to work with its member banks in Malaysia to initiate Europay-Master-Visa (EMV) chip migration. 

The EMV is a de facto standard for future debit and credit cards. It describes a set of requirements to ensure interoperability between chip payment cards and chip-enabled terminals on a global basis. 

According to Jafizwaty, the probable EMV migration deadlines over the next few years are: Europe by 2005, Asia, Africa and the Middle East by 2006, Latin America by 2007 and North America by 2008. 

She cautioned that the smart card payment industry continued to face competition from the low-cost magnetic stripe cards, particularly in regions where payments were locked into this technology structure. 

Jafizwaty said a strong barrier to smart card growth in the banking and retail sector was the existence of legacy payments infrastructure and the need to invest in upgrading them. “Many retailers are also reluctant to chip-enable their systems due to lack of interoperability and standards at all levels,” she added. 

This said, Jafizwaty remains optimistic about the smart card industry and expects a higher ratio of smart cards (62%) against magnetic stripe cards (38%) in the payment industry by 2006.  

Besides the existing applications, other emerging applications for the smart card are network security applications, university applications where multi-application cards are used by university students, pay-television applications to block unauthorised access by other users to programmes purchased by the viewer and utility applications, which is the payment of utility bills. 

Jafizwaty said although there were business opportunities for companies venturing into the smart card business, new entrants would face great competition.  

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