The Green Sheet :: GS Archives

A s we noted in our third quarter GSQ, Visa has announced that three to four issuers will deploy 70 million smart cards in the U.S. by 2005. While this does not mean that smart cards are finally going to be as common a household item as a toothbrush, it will be something that ISOs can really get their teeth into from a terminal sales point of view.

While I have been as skeptical as anyone about both the time it will take for smart cards to be seen in any significant number in the U.S. and about their relevance in a single-currency U.S. market, my recent vacation has made me reconsider.

I just completed five weeks traveling through Jordan, Sicily, Italy, Austria, Switzerland and France and found hundreds and hundreds of smart card terminals in use. While this is not surprising with Europe so much ahead of the U.S. on this point, I found the equipment's ability to move back and forth between swiped and chip cards completely seamless and Schlumberger equipment much revered by retail establishments in numerous countries.

Needless to say, perhaps, I pay attention to equipment wherever I shop and regularly ask questions about how it works, if the employees like using it and, if a business owner is willing to talk, why they choose the equipment they have. I find this last question compelling, particularly when the business has multiple terminal types and even manufacturers in use.

While I certainly would not say that my August/September trip was a working vacation, I did travel for the first time with no travelers checks and almost no U.S. cash, testing my ability to travel extensively on plastic and use my ATM card as a primary payment vehicle. Perhaps it was this little test that caused me to pay even more attention than usual to equipment and to discuss with people wherever I traveled their strong belief in chip cards.

As a starting place, let's see if we can answer the most obvious question: What real advantages should merchants expect from smart cards?

With Visa, MasterCard and Amex actively promoting usage of smart cards, it makes good sense to begin preparing for chip cards to become a part of day- to-day business operations in the bricks-and-mortar retail world - and in your life as a sales professional in this industry.

Smart cards have two major advantages for retailers. One advantage is enhanced security associated with the smart card's encryption and firewalling capabilities. While credit card fraud is not a major issue for North American retailers, increased online transmission of confidential customer data and the growing use of Web-based accounting and maintenance processes makes secure network access a necessity.

The second advantage is the capability to quickly and easily download exciting new loyalty programs and other innovative applications directly onto a smart card or a smart card-ready POS terminal. Here the smart card's inherent security comes into play again, protecting the integrity of the applications and ensuring that unauthorized information is not shared between the many different types of applications that reside on the card or terminal.

With several clear advantages and a major push from card issuers, it's inevitable that smart cards will begin being seen by retailers in the near future. So what is the most cost-effective way to transition to this new technology?

Here is one choice that might help a lot of ISOs who wish to get a jump on this learning curve.

SchlumbergerSema, which has pioneered smart card-based technologies for more than 20 years, has been focusing its resources on creating a cost- effective, seamless POS solution that enables North American retailers to painlessly move to smart card transactions. According to Paul Beverly, Vice President of the company's Transaction Systems business in North America, all it takes is a little "MagIC" - the SchlumbergerSema acronym for its Magnetic Stripe/Integrated Circuit POS solution.

"SchlumbergerSema understands the issues associated with the slow but inevitable transition to smart cards and has created a range of simple-to- use, easily upgradeable electronic payment terminals that combine magnetic stripe and smart card technology, software applications development and computerized tools for infrastructure management," Beverly said.

"The EMV-certified MagIC system combines the two technologies in open- platform POS terminals that support a full range of operating systems, including Visa Open, MULTOS and Proton. This approach enables retailers to rapidly and cost-effectively ramp up for the introduction of smart cards while utilizing today's existing magnetic stripe technology."

Range of terminals for different environments

SchlumbergerSema has more than 10 years of experience in smart card-based POS terminals and a worldwide installed base of an estimated 700,000 units. Based on this experience, it has designed its state-of-the-art, highly reliable and versatile MagIC line of POS terminals.

There are three types of MagIC terminals, all built on the same open platform. All MagIC POS terminals are smart card ready and ergonomically designed with a small footprint and fast, quiet printers. They are compliant with ISO Standard 7816.2, fully approved (level I and level 2) for EMV standards and can handle both synchronous and asynchronous protocols. State-of-the-art hardware- and software-based firewalling protects data against access by unauthorized users and ensures that data from different applications is never shared unless they are specifically designed to do so.

Multiple-application capabilities allow merchants to implement a variety of value-added smart card applications - such as gift cards, loyalty, age verification, check reading and e-purse - whenever they desire. The MagIC Management System even enables remote terminal initialization, remote application downloads/updates and remote maintenance.

But I am not going to be able to think about smart card terminals until my processor does!

While this may well be the case for many readers of The Green Sheet, perhaps the following information will help you make some arguments and increase the sales and processing stream:

+ The MagIC 6000 POS terminal is a dedicated, all-in-one, multitasking EFT dial-up terminal that can be used on a variety of processing networks. Its effortless paper loading allows the cashier to just drop the roll into the machine and close the cover, and the MagIC 6000 automatically positions the roll for the next transaction. It features a large backlit display capable of four lines of text and has a software-adjusted contrast and backlighting feature. It can be upgraded with additional memory as well as four plug-in "SIM-size" secure application modules (SAMs).

MagIC 6000 terminals are optionally equipped to communicate at baud rates from 9600/14400 bps. This outstanding speed allows merchants and transaction acquirers to substantially reduce operation costs when downloading applications, updating hot card lists or uploading transactions.

+ The MagIC 9000 portable, mobile POS terminal takes the transaction directly to the customers - at their restaurant table, at their door for home delivery or at a temporary site like a street fair or sporting event. The MagIC 9000 fits easily into the hand, integrates a quiet and fast 10- lines-per-second thermal printer into the handheld unit, has a compact docking station that takes up very little counter space and can process multiple cards per bill with online computation of outstanding amounts. It supports up to three "SIM-size" SAMs to enable acceptance of a variety of e- purse programs.

The MagIC 9000 comes in several different models. The radio-frequency (RF) version is a completely portable unit equipped with a powerful radio link that allows online transactions within an ideal radius of 100 meters and offline transactions at any distance. The infrared version is portable and allows for single-transaction capability near the base or complete offline transaction capability at any distance.

The corded version provides a semi-portable solution with an integrated PIN pad in the handset that is connected to the base station via a cord. The MagIC 9000 Mobitex terminal is designed for home delivery or other mobile applications, can operate independently via the Cingular Interactive network and completes transactions in an average of seven seconds or less.

+ The MagIC 1800 Multilane PIN pad is ready for easy connection to an Electronic Cash Register (ECR) or PC for implementation in a wide range of retail and banking applications. It delivers market-leading performance in transaction simplicity and processing speed, and its compact format is tailored to the demands of a busy multilane retail environment.

The Magic 1800 offers full multi-application support, enabling processing of smart or magnetic stripe cards combining basic debit/credit functions with value-added applications. Optional support for one full-size smart card reader and up to four "SIM-size" SAM cards adds to the terminal's operational flexibility.

Remote management optimizes terminal performance.

The SchlumbergerSema MagIC Management System (MMS) is an operating and application management system that enables remote initialization of MagIC terminals, remote downloading/updating of applications and remote maintenance. MMS, which operates in an open Windows NT environment with a powerful Oracle database, provides all the functions necessary for managing a broad terminal base in compliance with EMV standards.

Remote software download enables supervision of all applications run by the terminals. Remote initialization provides flexibility through terminal activation and convenient installation of applications. Remote maintenance provides up-to-the-minute supervision and optimization of terminal performance.

The firewall concept implemented in the terminals is extended to the MMS for an accurate management of independent applications. Security features are supplied with the MMS for access control, terminal and MMS authentication, and file transfer sealed or ciphered or in the clear.

According to Beverly, the SchlumbergerSema POS offering provides a win-win solution for the North American market.

There is no doubt that smart cards are going to become widely used for all types of transactions in North America. The key for retailers is to select open, standards-based POS equipment that accepts both magnetic stripe cards and smart cards and that can be easily upgraded for future revenue-building applications as they become available.

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