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Advantages of Smart Cards
The first main advantage of smart cards is their flexibility. There is no need, for example, to carry several cards: one card can simultaneously be an ID, a credit card, a stored-value cash card, and a repository of personal information such as telephone numbers or medical history. Such a card can be easily replaced if lost, and, because a PIN number (or other form of security) must be used to access information, is totally useless to people other than its legal bearer. At the first attempt to use it illegally, the card would be deactivated by the card reader itself.
The second main advantage is security. Smart cards can be electronic key rings, giving the bearer ability to access information and physical places without need for online connections. They are encryption devices, so that the user can encrypt and decrypt information without relying on unknown, and therefore potentially untrustworthy, appliances such as ATMs. Smart cards are very flexible in providing authentication at different level of the bearer and the counterpart. Finally, with the information about the user that smart cards can provide to the other parties, they are useful devices for customizing products and services.
Other general benefits of smart cards are:
Smart Cards and Electronic Commerce
Smart cards are turning out to be a fundamental piece of the transformation of retailing into electronic commerce. The impressive growth of the Internet is making electronic shopping at least a real possibility, if not a habit, among computer users. However, the business model used in current electronic commerce applications still cannot enjoy the full potential of the electronic medium. Moreover, concerns about the reliability of an invisible counterpart and about the safety of the Internet for credit card information increase the wariness and thereby limit the use of the electronic shopping on the part of customers.
Of the estimated 360 billion payments that took place in the United States in 1995, approximately 300 billion could not have taken place using the existing electronic media. Such transactions involved micro-payments p; i.e. payments for less than $10 p; which are virtually outside of the electronic arena for lack of a payment method compatible with such low amounts. Credit cards or checks are simply too expensive to use for micro-payments, and the e-cash currently being experimented on the World Wide Web does not seem to have the characteristics to appeal to shoppers. For this reason, smart cards could be a fundamental building block of widespread use of electronic commerce, since they are an instrument to pay at a low cost for transactions involving small amounts of money.
Another big advantage of smart cards for electronic commerce is their use for the customization of services. It is already possible to purchase tailored services on the World Wide Web p; MyYahoo and FireFly are well known examples. However, in order for the service supplier to deliver the customized service, the user has to provide each supplier with her profile p; a boring and time consuming activity. A smart card can contain a non-encrypted profile of the bearer, so that the user can get customized services even without previous contacts with the supplier.
Finally, smart cards are a key technology enabler for financial institutions. The processing power, the portability and the interactive properties of smart cards will constitute the basis for a revolution in the relationship between consumers and banks. PC-based home banking and phone banking will give way to card banking: a phone equipped with a smart card reader will be all that is needed for any kind of transaction.
Go to next section: Disadvantages of Smart Cards
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