Reuters: Sunday, October 6, 1996

Dutch Banks to Be First with Smartcards

By Lucas van Grinsven

AMSTERDAM-- Dutch banks are poised to become the first in the world to introduce computer smartcards on a nationwide scale this year, eventually giving 15 million people the possibility of living their lives without cash.

Dozens of smartcard trials are being carried out across the globe and industry pundits forecast billions will be in circulation at the beginning of the next millennium, but it's the Dutch who lead the field.

Undeterred by union warnings of thousands of job losses in the sector, Dutch banks will start issuing smartcards to their clients this month and by October 1997 all 15 million people in the Netherlands will have access to them.

The Dutch smartcards are not just reloadable cash cards but can also be used for on-line bank transfers, retail loyalty schemes such as airmiles, teleshopping and ticket reservation.

A Dutch consumer can store small amounts of cash on a card which can be used even for purchases such as icecream or bus fares. The money will be transferred from the card to the retailer's account without costly on-line links via the bank.

More expensive articles will ideally be paid on-line, validated by the client's secret four digit individual code.

Smartcards can be loaded at "cash dispensers," but by the end of 1996 topping up will also be possible at home via smartphones or cheap "home-loaders" connected to an ordinary telephone.

"The Netherlands is forerunner. We're the first country to introduce smartcards on a national scale," said a spokesman for the Dutch "Chipknip" consortium.

There will be two types of Dutch smartcards, issued by two groups of banks, Rabobank and ABN AMRO on one side with their "Chipknip," and Postbank and PTT Telecom on the other with the "Chipper."

"Our card has slightly more computer memory which will make payment transactions more secure," said the Chipknip spokesman.

The Chipper consortium on the other hand claims its card has a multifunctional character. "It's a services card. You can also use it to book cinema tickets and then go the theatre where your card is checked at the entrance for identification. You don't need a physical paper ticket anymore," a Chipper spokesman said.

Chipknip says such applications will also be possible with their card in the near future. In a bid to avoid a battle of standards, Chipknip said it planned to offer all Postbank customers their type of smartcard.

"This country is too small for two different standards," an ABN AMRO spokesman said. The computer chips on the current generation of smartcards can hold as much of four densely-typed A4 pages of information, but the industry keeps expanding capacity in the fight for this potential multi-billion dollar market.

The more information that can be stored on one card, the fewer smartcards consumers will have to be carried.

Trials in the U.S, such as one carried out in Atlanta at this year's Olympic Games by Visa, focus on payment transactions.

The Spanish and French governments will launch smartcards on a huge scale next year to make health care and social security safer and more efficient. People will carry their medical or social records on a card.

Public transport is another area for smartcards as they reduce ticket sales time and fare-dodging.

Contactless fare collection is currently pioneered in the South Korean capital, Seoul, using systems developed by Mikron Indentification, an Austrian company which was bought by Philips Electronics in 1995 and which also runs pilots in Sydney.

Smartcards are also used to personalise GSM telephones, computers and pay-television. Although the first smartcard was developed as early as in 1977 by Motorola and Bull for a bank in France, the home of the smartcard, they are only now catching on, but without one standard leading the industry.

The choice of an encryption method to ensure safety is still being debated as is the method for contactless reading.

The battle over smartcard technology and licence fees is being fought between a few companies, giants such as Motorola, Bull, Philips, Visa and Mastercard but also LSI, Thomson and specialised France's Gemplus and Britain's Mondex.

But Dutch banks and retailers, who will have to carry most of the infrastructure costs, will not wait for a single standard despite higher costs of adapting to different systems at a later stage. The immediate cost advantages are far too clear.