What‘s Benefiting Smart Card Industry?

Government initiatives, multi application functionality, open standards, biometrics, increasing IT role, booming virtual economy...  These are the buzz words floating around the contactless smart card industry.  At the same time, they are the key pillars of profits and revenues for the smart card industry.  Smart card specialist, Jan-Peter Hulsker, Managing Director of Integrated Engineering keeps us updated on the latest market situation, on-going technology trends, hot industry issues and many more we should keep track of, in an interview with Jeanny Lim, editor of SecurityWorld INTL.

How do you think the contactless smart card market performed last year?   

If you look at the contactless smart card market the last year there are governmental drivers that steer the market.  Due to the need for secure identification a number of initiatives are being developed around the world.  On a global scale we see the e-passport being introduced which contains an ISO 14443 compliant chip, but also the European drivers license and the PIV card and TWIC card in the U.S. are based on this technology.  The reason for the upcoming success of the contactless smart cards lies in the fact that the communication speed between card and reader, the storage capabilities and the processing power of contactless smart cards have increased considerably.  3DES, RSA security protocols are no longer only contact chip based and the processing and communication speed of contactless is much higher than the contact variant.

Specially, features as random encryption and mutual authentication will stimulate the further growth of contactless smart cards above the conventional technologies like prox which is basically unsafe due to the fact that if the signal can be recorded and if reproduced the 125 kHz prox reader cant tell the difference between the legitimate card or the reproduced recorded signal.

How do you see the market in the coming years?  Where do you think it is going? 

The above mentioned governmental drivers in market will for the coming years only form a bigger growth for the contactless smart card market.  But also the security awareness and the multiple application functionality of smart cards will push the ISO 14443 technology in volume for the coming years.

Based on these multi application possibilities you will see that in time the market will no longer accept proprietary technologies and will move to open standards to ensure interoperability.

According to your understanding, how are customer needs for access control and identification changing?   

TCP/IP based systems are definitely gaining over the more conventional hardwired access control systems due to the cost factor of cabling.  This also means that the role of the IT departments within the access control is getting stronger.  Where in past the security staff was responsible for selecting the access control system, we see nowadays that the IT department is taking over that role.

Looking at the market trends we see that more and more multinationals are introducing one card programs.  Like Integrated Engineering worked in the last few years on programs with Nissan, Proctor & Gamble and Sun Microsystems.  Another trend is the upcoming of biometric verification.  Due to the reliability, availability and the decreased cost of biometrics we see a strong demand for systems where the contactless smart card is used to store the biometric template of the user and so providing a higher level of security without invading the privacy of the user and biometric data stored in databases.

Please keep us on track of the technological trends of contactless smart cards.  What are some of the noticeable trends in recent years?   

I think the most noticeable trends are the increase of the storage capabilities on the chip which used to be 256 bits and now goes up to 1 megabyte (sharp), the security mechanisms and the drive to open standards therefore increasing interoperability and independency of single source suppliers.  What is also noticeable is the upcoming of virtual systems e.g. readers and door hardware that are fully TCP/IP based and through an integrated HTTP server with SSL communicate directly to a database that can be anywhere on the planet.

Please explain to us about strengths and weaknesses smart card-based access control systems have.    Naturally one of the strong points of smart card-based access control systems is the fact that it offers more security than the conventional 125 kHz systems.  Also the multi application side of it and the possibility to use PKI or special encryption protocols enable the contactless smart card-based system to offer a lot more.

The only probable weakness is that the reading distances because the high communication speeds are limited.  That makes these systems less suitable for ?Hands free" applications.

What do you think is the next challenge facing smart card-based access control industry?   

One of the trends that we see for the coming years is the upcoming of virtual access control systems, e.g. readers and door hardware that are fully TCP/IP-based and through an integrated HTTP server with SSL communication and a PKI structure directly communicate over the web to a database that can be anywhere on the planet.  Allowing a new type of service providers to facilitate in access control services to companies around the world and creating a completely different market.

Please update us of the smart card market situation of Europe.   

Strangely enough most of the contactless smart card technology originates from Europe but if you look at the European market you see that this now starts taking off, while the Asian market in volume has been much bigger in the last few years.

The European applications vary from public transport and debit cards to high secure military access control systems.

Where do you think the highest margins and profits and returns will be found?   

What we are experiencing is that within the access control market the cards and readers are considered to be commodities.  The margins and profits come from the higher end applications like high secure identification, biometric applications and EMV contactless payment systems.

What in your opinion are the biggest markets for RFID contactless smart cards?   

The biggest market would probably be the EMV market.  As we know there are a lot of payment terminals in the world that now use the magnetic stripe as data carrier.  If this technology is going to be replaced by the contactless technology than that will be a huge market over the coming years.  But naturally also the e-identification such as e-passports, e-drivers license and e-government applications will prove to be a big market.

Is there a regional variation in smart card applications?  Can you please introduce the most popular applications for the region of Europe, the U.S. and Asia?   

Most applications start in a certain part of the world but expand rapidly to the other continents.  At this point in time global applications would be access control and IDs as public transport applications are more Asian and European oriented but we see the expansion to the U.S. happening right now.  Further is due to 9/11 the demand for more secure identification stronger in the U.S. and we see a rapidly expanding market in identification there.

What are the technologies that are increasingly integrated with smart cards and what are the benefits of these types of integrations?   

The introduction of biometrics are increasingly integrated with contactless smart cards due to the fact that the carrier of the card remains in control of his biometric templates and therefore increases his privacy and because the data rate between card and reader is extremely higher with contactless than with contact based cards.  This makes it more time efficient in transferring the template to the reader and decreases waiting times.

How are the growing importance of the network technology and security industry trend toward systems integration affecting the smart card industry?   

I believe that the network technology will make a big difference for reader manufacturers like us and we naturally are participating in developments to be able to serve the industry with products that are adjusted to the industries needs.  For example readers which are capable of communication over TCP/IP and have various security features integrated, like point to point encryption, etc.  The system integration trends that are taking place are making companies more vulnerable as one system controls often all security systems in that company.  In my opinion this will benefit the smart card industry by means that there will be a higher demand for identification of authorized people that have rights to modify or control these systems.  For instance, secure logon via contactless smart cards and verification of peoples rights within the system.

What are the market drivers and inhibitors, to your mind?   

The need for more reliable security and secure identification is driven by the recent terrorist attacks around the world.  This has lead to the fact that most of the times governments are the driving force behind a number of projects that serve for better identification of visitors and domestic in their country.  A way to do this is to make falsification and fraud more difficult for people with the wrong intentions.  The virtual economy that is created rapidly through media as Internet also require more security measurements to prevent abuse and secure peoples privacy and property and smart cards can be a great help to achieve this.

Please tell us if there has been any technical breakthrough or solutions Integrated Engineering, Inc. has made recently, and thus contributed to the security industry.   

Our focus is on being a technology partner for our customers.  Integrated Engineering has always been looking at innovating our technology to provide our customers with adequate solutions.  Within the e-passport industry we have actively contributed to the definition of the ISO standard.  That has made us one of the market leaders in the production, personalization and verification of the information stored in the e passport chip.  We have a unique and secure way of upgrading the complete firmware or configuration of our readers by using a contactless smart card, so our customers can grow with the state of technology without having to change their reader hardware.  Our read/ write devices can read all ISO 14443 A and B chips regardless of the operating system or make of the chip, which gives us a unique position in the field of interoperability.  We also make our products fully configurable by a flexible input (card data) and output engine.