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Tags: application cards, april 4, conference london, critical success factors, debit cards, digital money, ealth care, electronic purse, european commission, financial applications, goldfinger, holy grail, interoperability, optimistic projections, orga, posture, presentation plan, s trap, smart card market, smart cards,Pages: 8
Language: english
Created: Tue Mar 28 21:09:44 2000
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GEF
Smart cards in European
Financial Services
Charles Goldfinger
Digital Money 3 Conference
London, April 4, 2000
GEF
Smart cards in European
financial services
q Presentation plan
ÿ Imminent take-off or eternal application of the
future ?
ÿ Lessons of experience
u Debit cards
u Electronic purse
ÿ Multi-application cards: Holy grail or Fool s Trap ?
ÿ Interoperability challenge
ÿ European Commission posture
ÿ Critical success factors
London, April 4 2000 2
GEF
Financial smart cards
q Imminent take-off
ÿ Optimistic projections for 2005 - 2010
q or eternal appli cation of the future ?
Smart card market 1997
20%
Telecommunications
4%
Financial
Loyalty and H ealth care
applications
76%
(Source Gemplus, Orga, Philips)
London, April 4 2000n Financial applications: 4% of the total 3
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GEF
Blue skies
q Mobility management
ÿ Terminal independence
ÿ Thin client facilitator
q Secure access
q Greater efficiency
ÿ On-line/off-line integration
ÿ Certificate management
q Developing innovative services and systems
ÿ Flexible stored value manag ement
ÿ Cross-channel applications
London, April 4 2000 4
GEF
Dark clouds
q Atlantic divide
ÿ Limited acceptance in the US
q Technical performance
ÿ Certificate management
ÿ Network overhead
q Technological uncertainties
ÿ Which operating system ?
q Fragmentation
ÿ Geographical
ÿ Sectoral
London, April 4 2000 5
GEF
Dark clouds
q Ambivalent commitment of banks
ÿ Doubts about economic viability
u Elusive business strategy
ÿ Belief in strategic importance of technology
ÿ Co-opetition and not-so hidden agendas
u Banks and banks
u Banks and retailers
u Banks and card networks
London, April 4 2000 6
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GEF
FASC: Today and tomorrow
q Today
ÿ Debit cards
ÿ E-Purse
q Inconclusive experience
ÿ Cross-border replicability ?
ÿ Customer acceptance ?
ÿ Business case ?
q Tomorrow
ÿ Multi-application cards
ÿ Internet Sesame
London, April 4 2000 7
GEF
FASC today
q Debit security cards
ÿ Business case considerations
u Fraud reduction
u Telecommunication costs reduction
ÿ Replicability issue
u Strong business case in France
u UK deployment scheme based on other considerations
ß SC seen as a core technology
ß Competitive threats from retailers
¥ Who are part of the scheme
London, April 4 2000 8
GEF
Electronic purse
q Lessons of experience
ÿ Variety of approaches
u Over twenty projects in Europe
ÿ Common elements
u Incompatibility between current schemes
u National/local focus
u Cash replacement emphasis
u Low market acceptance
ß Slow terminal deployment
ß Very low transaction rates
London, April 4 2000 9
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GEF
Electronic purse
q Business case for a stand -alone¨ EP
ÿ Elusive or hopeless ?
u Teething problems ?
ß Financial products build up slowly
¥ Debit card experience
u or a structural defect ?
ÿ Two fatal flaws
u Marketing focus
ß Retailers
ß Customers
u Technology - business mismatch
London, April 4 2000 10
GEF
Electronic purse
q Marketing focus
ÿ Merchants
u Large retailers
ß Why encourage small purchases
u Small shopkeepers
ß Any additional revenues ?
ß No cost reductions
ÿ Customers
u No incentive to switch
u Cash preference
ß Older customers
¥ Not technology friendly
Targeting laggards rather than early adopters
London, April 4 2000 11
GEF
Electronic purse
q Technology - business mismatch
ÿ Technology
u More sophisticated and expensive than magnetic
stripe
u Need for a dedicated system architecture
ß Reloading
ÿ Business proposition
u Small amount transactions
ß Lower than credit and debit card
High tech - low value
London, April 4 2000 12
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GEF
Electronic purse
q Need for a radical rethink
ÿ Basic concept
u From cash substitution to cash enhancement
ß Increase the range
¥ Pure cash substitution
- Non reloadable/anonymous
¥ Cash enhancement
- Reloadable/accountable
u From market segmenting to market overlapping
ß Seamless financial card
¥ Credit -- debit purse
--
From EP product to EP function
ÿ Marketing
u Focus on early adopters
u Make switching benefits explicit
ß Incentive rather than punitive pricing
London, April 4 2000 13
GEF
Electronic purse
q Shifting marketing focus
ÿ Generic cash
u Low and diffused demand
u Cash infrastructure as a network good
From critical mass to ubiquity
ÿ Specific cash
u Hig h and concentrated demand
u Critical mass easy to attain
u Example
ß Prepaid GSM cards
ß Retail loyalty cards
London, April 4 2000 14
GEF
Multi-application cards
q Holy Grail
ÿ Maximising scarce real estat e
u Taking advantag e of chip integration
ÿ Economies of scope
u Taking advantag e of system integration
u Developing innovative services and systems
ÿ Stronger business case
u Hig her revenues potential
ß Cross-selling
London, April 4 2000 15
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GEF
Multi-application cards
q Fool s Trap
ÿ Customer acceptance
u Risk management
u Complexity of use
u Privacy concerns
ÿ Brand manag ement
u Brand primacy or brand coexistence ?
ÿ Institutional complexity
u Card real estate governance
u Revenue and cost allocation
ÿ Technological uncertainties
u Security architecture
u Operating systems
London, April 4 2000 16
GEF
Multi-application cards
q No panacea
ÿ Accept a plurality of approaches
ÿ Progressive implementation
u Initial focus on multi-functional cards
ß Common application owner
ß Unity of purpose
u an d defined user groups
ÿ Hide complexity
ÿ Think system and network
London, April 4 2000 17
GEF
Interoperability challenges
q Standards
ÿ EMV
u Avoid X-25 syndrome
ß Not quite compatible networks
u CEPS integration
u Multi-functional environment
ÿ CEPS
u How common is Common ?
u Mig ration path
u Multi-functional integration
ÿ SET
u Smart card integration
u Governance
u Future
ß Cybercom outlook
London, April 4 2000 18
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GEF
Interoperability challenges
q Technical
ÿ How many chips?
ÿ How many keys ?
q Institutional
ÿ Co-ordination
ÿ Continuity and mig ration
ÿ Intersectoral dialog ue
ÿ Co-opetition management
u Conflicts of interest
u Zero sum and non-zero sum games
London, April 4 2000 19
GEF
European Commission posture
q Shifting into a higher gear
ÿ Long-standing interest in smart card
u Technological focus
u Few pilot project
u Uneasy relationship with financial institutions
ÿ Two vectors of urgency
u Euro
u Electronic commerce
Recognised need for new initiative and approaches
London, April 4 2000 20
GEF
European Commission posture
q Political and financial commitment
ÿ E-Europe initiative
u Smart card -- one of the ten prority actions
i
ß Objectives
¥ Harmonise smart card based infrastructures across industrial
sectors
¥ Encourage interoperability via business reciprocity
agreements,
¥ Promote integration of smart card based payments services
ß Milestones
¥ Smart card charter -- April 2000
¥ Common specifications for generalised smart card
infrastructrure -- end of 2000
¥ Smart card-based payment services deployment -- end 2001
of
ÿ Cross-programme on smart cards in third IST call
u Substantial funding
u Deadline -- May 1 , 2000
0
London, April 4 2000 21
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GEF
Critical success factors
q Combine interoperability and large-scale
deployment
q Recognise the variety of approaches
ÿ Create a formal structure for
u Bring ing together all concerned parties
ß Banks
ß Financial networks
ß Other card issuers
ß Merchants
ß Specialised standard bodies
ß Technology suppliers
u Ensuring standard convergence
ß Focus on interfaces, APIs and performance criteria
Toward GSM/ETSI model for FASC ?
London, April 4 2000 22
GEF
Critical success factors
q Create the strategic triangle
GSM Internet
Smart
card
London, April 4 2000 23
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