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To: Thomas Kirwin who wrote (13064)	12/12/1999 11:05:00 AM
From: Toni Wheeler	Respond to of 17679

The U.S. Smart Card Market: Expect Big Growth By Sigi Eichinger <<<Compelling business reasons will spur sharp growth in smart card usage in the United States over the next few years, predicts an executive at a large chip card vendor. The slow overall growth of the U.S. smart card market has been a frustrating experience for the leading developers of this technology. They expected Americans to accept the concept enthusiastically, as so many people already have in other parts of the world. In hindsight, however, many of us failed to adequately take into consideration the unique characteristics of the U.S. marketplace. In Europe, for example, economic interest groups and government mandates have played an important role in the extensive implementation of smart cards throughout society. These market drivers are nonfactors in the United States. Large-scale rollouts of smart cards have been limited in the United States by the large investment made in the current magnetic-stripe infrastructure, coupled with the high cost of converting existing terminals to accommodate chip cards. This issue surfaced during last year's trial of Visa Cash and Mondex electronic-purse cards on the Upper West Side of New York City. Although the program's objective was reached in terms of demonstrating card interoperability and the number of cards issued, the effort met resistance from merchants unwilling to scrap the old system. Also hampering smart card growth in the United States is the coexistence of-and fierce competition between-multiple standards and products. The wireless side of the telecom industry offers a perfect illustration. Complicating the digital phase-in are three standards from which operators may chose to launch their new networks: CDMA, TDMA and GSM. Only GSM presently uses a chip-based SIM [subscriber identity module] card to operate the handset. As a whole, the smart card industry is still wrestling with the issues of open standards and interoperability. Don't be discouraged. The U.S. marketplace for smart cards is bountiful. Their spread and use will be accelerated by the introduction of open standards that will dramatically decrease application development costs and make customers more comfortable with the technology. The lesson to be learned from past failures is that a different approach is required to achieve success in this country, and it must be based on the following principle: The business application drives the technology solution. Certain market segments are more mature than others and offer the best immediate opportunities for smart card penetration. Here is my assessment of key growth areas: Electronic Commerce: Many experts believe that the Internet will be the next "killer application" for smart cards, especially in North America, as more and more consumers purchase goods and services electronically. Earlier this year, based on a market study, Visa predicted that worldwide electronic commerce revenues would exceed $1 trillion by 2003, representing a compound annual growth rate of 66%. The United States represents 59% of the total e-commerce market. In 1998, approximately $74 billion was spent through commercial trading over the Internet. Access Control and Security: Smart cards offer a secure method of authentication and identification for Internet users, ensuring maximum integrity and confidentiality of every e-commerce transaction. In the future, individuals will log onto their personal computers and corporate networks using a smart card with a special encryption key that prevents unauthorized users from gaining access to data on the system or network. Already, such major PC manufacturers as Hewlett-Packard Co. and Dell Computer Corp. are equipping their computers with smart card access capabilities. Microsoft is developing a Windows for Smart Cards platform, and its Windows 2000 upgrade of the Windows NT operating system for corporate networks will be smart card-enabled. There is the distinct possibility that Microsoft may one day issue its own smart cards to stop the unauthorized copying of Windows software. If successful, this step could eventually lower the cost of the software to the buying public. Health Care and Social Services: The U.S. scenario for the introduction of smart cards in health care and social service applications will in no way resemble national rollouts in Germany and France. Instead, the market will be driven on a case-by-case basis in closed system environments.>>> Sigi Eichinger is president of Orga USA, the Paoli, Pa.-based subsidiary of Orga Kartensysteme GmbH, Paderborn, Germany.

To: Thomas Kirwin who wrote (13064)	12/20/1999 11:04:00 AM
From: Ray	Respond to of 17679

HI Tom! The problems with a transition from "regular, old-fashioned" cards to a new, "Keepered Media" card, will be VERY expensive and bothersome for all involved. Keep in mind, while the actual ccr (credit card reader) on a pos terminal (point-of-sale...aka cashregister) is one of the least expensive parts of the pos, when you multiply the cost of one by the literally millions of pos in use, you are talking real BIG money. Specially when you consider that about half of the pos currently in use have the ccr built into the keyboard...mostly in a manner that it will require replacing the entire keyboard. The keyboard, with all of its moving parts and really fragile internal architecture,is one of the MOST EXPENSIVE parts of the pos! I really have no internal knowledge of what is being planned by any pos manufacturer, or large users of pos, but I feel that I am not far wrong that any new system of reading cards MUST - MUST - MUST be downward compatible, able to read the old cards also. Dual stripes is really not a "transition option", as it will require the "new Keepered Media" reader to be installed, making it not really a gradual transition, but a "great leap forward" to the new technology. It is done all the time (it's what keeps me employed), but retailers are, and must be, VERY conservative in planning expenditures at the pos level. AND, practically ALL of the major chains have just gone through a MAJOR expenditure in order to upgrade all their installed pos to be Y2K compliant! That's what I have been doing for the past 2 years now...installing and upgrading systems for retailers, banks, and "financial industry" customers. (I am a semi-retired IBM Customer Engineer that the company dragged out of retirement to work in Y2K type updates, installations, and remediation...didn't want to, but they just kept laying money on the table until I couldn't turn it down.... :-) ) You can not possibly believe how much money has been spent in this effort...can you say "Billion$ of Dollar$" If nothing else, the "Y2K Problem" has been a great $ale$ opportunity for the marketer$ of po$ equipment and $ervice$!!! The big pos users ARE NOT going to want to spend BIG BUX on doing all of it over really soon. I predict we will have around a 3-5 year wait before we see this "new Keepered Media" credit/debit card technology get major industry penetration. Now, having said all that, in which I identified myself as associated with "Big Anonymous Color", I must try to satisfy the lawyers... All of the comments herein are a result of my own research and production, external to any duties that I may have with IBM or have had with them in the past. They are my own, and NOT those of any current or former employer, or any employer which I may have in the future. Nor are they related IN ANY WAY with my internal duties with any former, current, or future employer, either by direct employment or on a contract basis. (Don't you just love lawyers??) Ray