July 25, 2002
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IN THIS ISSUE:
1. Editorial Comment
2. Smart Card Groups Form Global Network
3. Cdn Online Banking Doubles Over Two Years
4. Merchants Team Up With Smart Cards
5. Datakey Expands Its Business With The Cdn Gov't
6. Ingenico Provides Retailers With Solution To Customer Identity
7. Daimlerchrysler Bank Heads Emv Uptake In Germany
8. KaSYS Int'l Opens KaSYS Canada
9. Worldwide Use Of Smart Cards Increasing
10. Cubic Completes WMATA Tests
11. Bank Islam Malaysia Berhad Issues MasterCard Smart Cards


ACT CANADA WOULD LIKE TO THANK OUR NEW & RENEWING MEMBERS:

GENERAL
ACI Worldwide (Canada) ~ member since 1998
Canadian Bankers Association ~ member since 1992
EDS ~ member since 2001
ACT CANADA - REGISTER OF ACHIEVEMENTS
STIMULATING MEMBER'S BUSINESS
Building Market Awareness

Catherine Johnston recently spoke to the International Trade Club of Toronto, on "Trade, Privacy & Cyber-Terrorism, What is the Common Denominator?" Among the audience were trade representatives from Quebec, Malta, Moldova, Belgium, Great Lakes Governors, Illinois, Switzerland and Japan.

Security & Privacy were the subject of Interviews with CBC TV and Radio and QR77 (Edmonton) following ACT Canada's Cyber-Terrorism symposium.

EXTENDING MEMBERS REACH & INFLUENCE

The National Infrastructure Forum members have set a fall publication date for white papers on Infrastructure, Consumer and Corporate Users, Privacy and Business Rationales.

ACT Canada is proud to announce their role as a founding member of the International Smart Card Association Network (ISCAN). See article in this newsletter for further details.
1. EDITORIAL COMMENT
Source: Catherine Johnston, President & CEO, ACT Canada (07/23)
Last month looked at backbone applications, a foundation on which all issuers can build business cases and customer value. These are the applications that need to get to market quickly and most often deal with security. Today they deal with identification and authentication. These are the applications that will allow you to determine who gets access to your buildings, network data and even social benefits. They are driven by security needs, not by their ability to drive revenue.

Most of the activity seen in North America is focused on these backbone applications. This is almost good news. It will help the industry in the mid to long-term, but in the short term there are hurdles to overcome.

Issuers are taking a strong stand on interoperability. They are looking for shrink wrapped solutions and are unwilling and sometime incapable of being integrators. This is a costly challenge for an industry that has invested heavily in the North American market, with little return to date.

Likely leading in this market will be suppliers that form alliances to bring together components or to North Americanize solutions from other countries. To survive, suppliers should move from the commodities to the solutions market.

What else do issuers want? More on that next month.
2. SMART CARD GROUPS FORM GLOBAL NETWORK
Source: ACT Canada (07/22)
Seven smart card organizations from around the world have agreed to form a network to share information and meet twice a year to discuss major smart card-related issues. Charter members of the International Smart Card Associations Network (ISCAN) include Eurosmart, AFPC, the Smart Card Alliance, The Advanced Card Technology Association of Canada (ACT Canada), the Smart Card Society of Southern Africa, the Smart Card Forum of India and GlobalPlatform, an organization that sets standards for multi-application smart cards. The network will sponsor meetings in the spring and the fall at the two largest smart card exhibitions, Thomson Media's CardTech/SecurTech in the United States, and Cartes in Paris.

Catherine Johnston, President & CEO of ACT Canada sees the formation of ISCAN as a positive move. "There are core issues that have impeded the development of the smart card market, particularly in North America. We need to address those quickly and that is best done by sharing information."

There are no plans now to hire staff or charge membership fees. A charter has been drafted and is being approved by the founding members.
3. CDN ONLINE BANKING DOUBLES OVER TWO YEARS
 Source: Geoffrey Downey, IT Business (07/09)
The number of Canadians conducting most of their banking on the Internet has doubled in two years and more are expected in the next three.

According to a Canadian Bankers Association poll, 16% of Canadians say the Internet is their primary means for conducting bank business. By 2005 more than half (56%) of bank clients will use the Internet for some tasks.

The statistics match trends at three leading Canadian banks.

"It's absolutely no surprise. It's completely consistent with everything we've been experiencing," Chuck Hounsell, SVP, e-bank at TD Canada Trust. "When we look at our core customer base on retail, over 33% of households have registered for online services."

Corinne Charette, SVP of Internet channel, retail market, for the Canadian Imperial Bank of Commerce, says if anything the number of people using Internet at her bank has more than doubled. Scotiabank SVP of electronic banking Bob Grant echoes her position.

While the number of users has doubled, the subsequent traffic skyrocketed as well. Charette calls the phenomenon transaction inflation. Some users check their account balance once or twice a day, she says.

"Customers who bank online do so with greater frequency than, say, a telephone customers or a branch customer. It's easier for them to do, particularly if they have high-speed connections and the Internet is a part of the way the work or live," Hounsell says.

Despite the increased traffic, none of the banks report any concerns over scalability. Charette says CIBC is in the middle of a complete revamping of its infrastructure and capabilities, while Grant and Hounsell say they can deal with huge growth with minor hardware changes.

Banks are increasing their budgets to deal with the rising demand. According to the CBA, Canada's big six banks spent $3.7 billion on technology last year, more than double the spend five years ago.

The Canadian Bankers Association, Scotiabank & TD Canada Trust are members of ACT Canada. For more information about any of the above mentioned companies, please visit their web sites: http://www.cba.ca; http://www.scotiabank.com; http://www.td.com; and http://www.cibc.com.
4. MERCHANTS TEAM UP WITH SMART CARDS
Source: ICMA Daily News (07/08)
Only a handful of chip-based credit cards carry loyalty programs. But there are a growing number of merchant-issued chip cards, especially for rewards programs involving multiple retailers.

For instance, in the Shetland Islands in the north of the United Kingdom, nearly 50 retailers banded together in the Shetland SmartCard program in late 1999, hoping to keep consumers from taking their business to the mainland.

While there are only 5,000 households in the Shetlands, there now are 11,000 cardholders in the program, says Randal McLister, managing director of UK-based Scotcomms, which implemented the system. Cardholder balances are updated with each use, and printed on the receipt, so there is no need for mailing statements, McLister notes. The memory cards used in the Shetlands are supplied by Gemplus International SA, and the POS terminals by Dione.

Scotcomms has several other smart card programs in the works, some with a loyalty component. For instance, the Chelsea Football Club has ordered 80,000 smart cards that fans will use when they want to exchange tickets with each other. Besides deterring counterfeit fraud, the team will be able to send a "hot list" of cardholders identified as troublemakers, and the card-reading turnstiles will deny them entrance. Meanwhile, with thousands of rabid soccer fans carrying these cards, McLister says Scotcomms plans to sign up local retailers to offer discounts to customers with those smart cards.

SCM Microsystems Inc. has announced a deal to ship 10,000 chip card readers to City Card Systems AG of Switzerland for multimerchant loyalty programs aimed at small and mid-sized retailers. As in the Shetlands, the cards are memory cards, which cost under half a euro, says Mladen Filipan, EVP of SCM. Terminals, with software, cost $120 to $180. Unlike a magnetic-stripe card, a chip card allows merchants to offer rewards without continually connecting to a back-end computer.

In the Sunshine Coast area of Australia north of Brisbane, more than 1,100 merchants and 15,000 consumers participate in a program called Smart Cash developed by Vision Australia. Consumers pay any way they like, insert their smart cards for identification and receive a rebate check in the mail each month proportional to their spending at Smart Cash merchants.

The system could work with magnetic-stripe cards, but Vision Australia is looking to the future, says Nigel Basson, director of business development. "It was important to build a platform that we could introduce to new facilities that were smart card-based in the future," he says. Adding an electronic purse to the card is one idea in the works.

A Canadian merchant wound up with a smart card-based loyalty scheme because its computer specialists were consumed with Y2K issues when the loyalty program was conceived in 1999.

The IT department did not want to have to link all of Northern Stores' POS terminals to the host computer, so the company issued smart cards and deployed standalone loyalty terminals, says Carl Hanson, VP of marketing for the specialty apparel retail chain.

With bonus points stored on the Northern Friends smart card, the 560,000 cardholders can redeem rewards instantly at the chain's 350 stores. The program was developed by Cyberpro Technologies, which was subsequently acquired by loyalty software developer Welcome.

Today, with Y2K a fading memory and the company disengaging its computer networks from a former corporate parent, Hanson says Northern could consider the less-expensive magnetic-stripe or bar-coded cards many other merchants issue.

But Hanson notes a chip card could make it easier to create a cooperative loyalty program with other merchants. And, he says, Northern has been approached by some banks about possibly putting its loyalty application on a bank-issued chip card.

Finally, he sees smart cards as offering greater security. Hanson notes when Mrs. Smith keeps the bonus points on her card, she is responsible if someone else uses the card to redeem those points. "If I'm storing the points on my system and someone redeems that money, then the real Mrs. Smith comes in and says 'I had an account balance,' the retailer would be responsible," Hanson says.
 
5. DATAKEY EXPANDS ITS BUSINESS WITH THE CDN GOV'T
 Source: PRNewswire-FirstCall via COMTEX (07/16)
Datakey announced that it has added new production programs and expanded current projects with the Canadian government. Datakey delivered smart cards, readers and CIP client software to 16,000 users at three different Canadian government agencies in the second quarter.

The Canadian government has been a pioneer in the adoption of smart card technology. In particular, major programs such as the Department of Defense E-mail System II project -- which Datakey was selected for last year -- demonstrate the progressive approach that Canada has taken in e-government initiatives. The selection of smart card technology for strong security and user authentication in these initiatives is helping to validate for other organizations in both Canada and the United States as a whole how smart card technology adds a vital layer of security to network environments and online resources.

For more information about Datakey, please visit their web site at http://www.datakey.com.
6. INGENICO PROVIDES RETAILERS WITH SOLUTION TO CUSTOMER IDENTITY
 Source: PRNewswire via COMTEX (07/16)
In an answer to retailer consumer identify theft liability, Ingenico's eN-Concert Signia(R) provides a secure and paperless solution to managing credit card receipts. Signia is a comprehensive signature and image document storage, retrieval and management system that solves the problem of storing and retrieving signatures and credit card receipts while reducing the opportunity for receipt mishandling.

Identity theft is the fastest growing major crime in the U.S. today. The U.S. Secret Service estimates that approximately 900,000 persons will be victims of identity theft this year. Not only is identity theft a major problem for individuals, but potentially for retailers who are often victims through mishandled merchant copies of bankcard receipts.

Through recently passed identity theft legislation in California, Georgia, Wisconsin & Oregon, injured consumers residing in those states can file lawsuits for civil damages against companies that fail to comply with the statute to destroy customer records by shredding them, erasing them or making them unreadable. According to the Executive Director of the National Association for Information Destruction, between 50% and 75% of the all states have active legislative initiatives in the areas of identity theft deterrence and consumer information destruction.

Lloyd Baylard, EVP & GM of Ingenico's Retail Systems organization stated, "When the time comes to purge the oldest merchant copies, some retailers shred them while others place them in the dumpster. Although some merchants mask all but the last 4 digits of the card number on the customer copy, the full account number is printed on the merchant copy with the card expiration date and cardholder's name, making an attractive opportunity for identity theft. If the merchant copies are the compromised, the merchant can be held liable."

Ingenico Canada is a member of ACT Canada. For more information about Ingenico, please visit their web site at http://www.ingenico-ca.com.
7. DAIMLERCHRYSLER BANK HEADS EMV UPTAKE IN GERMANY
 Source: epayment news (07/08)
Technology group Giesecke & Devrient (G&D) is to supply DaimlerChrysler Bank with the first EMV cards for electronic payment to be issued in Germany.

The card combines the payment function defined to the standard of card organizations Europay, Mastercard and Visa (EMV) with customer loyalty programs.

The first 20,000 cards will be issued as from July 2002. In addition, DaimlerChrysler Bank has decided to purchase its entire chip-based EMV card range through G&D. DaimlerChrysler Bank is the first German bank to consistently implement migration from the magnetic stripe card to the chip card. This means the starting gun has gone off in Germany for implementation of the card organizations' guideline directing that all electronic payment cards worldwide are to be switched for security reasons from magstripe to chip by 2005.

Giesecke & Devrient Canada is a member of ACT Canada. For more information about G&D, please visit their web site at http://www.gdai.com.
8. KaSYS INTERNATIONAL OPENS KaSYS CANADA
 Source: KaSYS (07/22)
KaSYS International opens KaSYS Canada in Montreal in cooperation with Conceptum in order to offer its testing solutions for transactional and smartcard systems in Canada.

The European leading provider of testing solutions for transactional, payment and smartcard systems chose Montreal City as its base to expand in the North American market.

This opening coincides with the first contract signed in Canada with Le Mouvement des Caisses Desjardins (Montreal based financial institution). In an increasingly competitive environment where providers have to offer adapted and flexible payment solutions to their customers, Desjardins chose to improve and accelerate its POS (Point Of Sale Terminal) certification process by using KaNest(TM) test tools.

The execution of this solution rests on the cooperation between Conceptum and KaSYS Canada and their partnership for the diffusion of the KaNest(TM) test solutions in Canada.

KaNest(TM) provides the base for implementing and testing transactional and payment systems such as smartcards, POS Terminals, ATMs (Automated Teller Machines), acquiring hosts or authorization hosts.

About KaSYS
For more than 15 years KaSYS has been providing testing solutions for transactional, payment and smartcard systems in Europe in order to test their conformance. The KaNest(TM) solution permits testing of smartcards, POS Terminals, acquiring and issuing hosts and ATMs. KaSYS is one of only two companies around the world that has been validated and recommended by Visa International for its EMV Level 2 Test Suite. KaSYS Canada opened in March 2002 to distribute and adapt KaNest(TM) to the North American market and provide technical support and training for this market.

KaSYS Canada is a member of ACT Canada. For more information about either company, please visit their web sites at: http://www.kasys.ca and http://www.conceptum.ca.
9. WORLDWIDE USE OF SMART CARDS INCREASING
 Source: ICMA Daily News (07/12)
Smart cards are continually opening up new fields of application as multifunctional identification and security devices.

The range of smart cards extends from the simple memory card (such as everyone in Germany carries to show his/her health insurance details) to sophisticated microprocessor cards that can perform complicated calculations and also replace all official forms of identification.

Last year, some 2100 million smart cards were in use round the world, in the form of credit cards and cash cards, telephone cards, company passes, or driving licenses. By 2004, the number will rise to over 3600 million. Because they are so versatile, they also play an important part at electronics. Advanced versions do not even have to be inserted in a slot, but work by radio or inductive loops.

The trend is clearly toward the multifunctional card; the laboratories are already developing chip cards containing a tiny display, keyboard, and battery, rather like an extremely small and flat computer. Integrated sensors will then be just a small step away.

Europe is still clearly leading in the use of smart cards: ahead of Asia, Latin America, and the USA. That is the result of a survey by the Datamonitor market research institute, which recorded a total world turnover of nearly $3 billion last year, more than half that sum in Europe. For the third year running, according to Gartner Dataquest, Infineon Technologies is number one in the world, in terms of numbers and turnover, with a market share of 47% in chip-card ICs - the semiconductor heart of every smart card.

By the year 2006 the total turnover will have risen to $8 billion, but the European share will have sunk to 36%, the swing being mainly in favor of Asia. And that not least because next year Japan will replace about 120 million identity cards with chip cards, which from 2004 will additionally hold the driving license, including not just personal details but also a passport photo and fingerprint.

China is planning a similar ID card, and even the USA, which has never had national ID cards, is expected to introduce them following the events of 11 September 2000. Security experts consider that the chip card is ideal for storing personal data in machine-readable form.

SIM cards for mobile phones are still very important, even if the fall in this market sector has left a dent in the turnover statistics. Frost & Sullivan expect new growth opportunities, in their latest analysis of the financial commitments of mobile-phone providers. The combination of chip cards and existing customer and billing systems forms a good basis for enticing a share of the market away from the banks, whose cash cards have not yet proved very popular. The study expects a further growth potential from the convergence of mobile telephones and the Internet.

The security features of a smart card are at the fore. However, the challenge involves satisfying two opposing demands: an open platform and adequate security. Modern biometric methods such as fingerprint analysis, automatic recognition of a signature, voice, or face, iris scanning or hand geometry are increasing the security level more and more.

Of course the chip card is only part of a system which also comprises the card reader and the software including the operating system. In future one will be able to download additional applications with no risk of viruses. To make that possible, however, the next generation of smart cards will have to provide considerably more storage space than at present.
10. CUBIC COMPLETES WMATA TESTS
 Source: Internet.com via COMTEX (07/16)
Cubic Transportation Systems Inc. has completed factory tests of its smart card automatic fare collection system for buses operated by the Washington Metropolitan Area Transit Authority (WMATA). Cubic received a contract from WMATA in January of last year to extend its smart card automatic fare collection system -- known as SmarTrip -- to all WMATA buses.

The new regional program will link payment for WMATA buses serving Washington and parts of Maryland and Virginia with the Metro's existing SmarTrip system. The system links rail travel, parking operations, employer transit benefits, and soon, buses, to a single fare medium.

"The successful results of this initial testing mean that WMATA is now officially one huge step closer to having the nation's first 'smart' interstate, intermodal, mass transit fare collection system," said Richard Johnson, C.O.O. of Cubic Transportation Systems.

Washington made history as the first U.S. city to deploy a contactless smart card system-wide for its mass transit system. The SmarTrip card has gained widespread acceptance in the Washington area, particularly in the past year. Recently, WMATA announced it signed up its 250,000th SmarTrip customer. WMATA is adding an average of 3,000 new SmarTrip customers each week. The cards are multi-modal, meaning they're usable across all WMATA trains, park-and-ride facilities and now, buses.

For more information about Cubic, please visit their web site at http://www.cubic.com.
11. BANK ISLAM MALAYSIA BERHAD ISSUES MASTERCARD SMART CARDS
 Market News Publishing via COMTEX (07/09)
NBS Card Technology, a division of MIST Inc., announced that Bank Islam Malaysia Berhad has begun issuing MasterCard M/CHIP smart cards using the MIST NBS Smart EMV Card Issuance Process with Conquest(TM) card issuance software and Advantage(R) series card issuance machines.

"As a trendsetter for Islamic banking, we are proud to be the first Islamic bank to issue EMV smart cards," said Encik Abdul Rahim Abdul Razak, Assistant GM, Bank Islam Card Centre. "We anticipate good support from our potential customers following the issuance of these smart cards. NBS has been flexible and responsive to our concerns as a first-time smart card issuer."

"Malaysia is an excellent environment for the deployment of smart card technology. With more than 100 million MasterCard branded smart cards issued worldwide, MasterCard continues to lead in the smart card arena. For Malaysian banks, implementation of EMV smart cards will not only help reduce card fraud, it will provide a platform from which to deliver better differentiated products across a growing array of new delivery channels. We are glad to see MIST NBS providing solutions to financial institutions to make chip migration a reality," said Shuan Ghaidan, VP, Advanced Payment Systems, Asia Pacific Region, MasterCard International.

MasterCard Canada and MIST Inc. are both members of ACT Canada. For more information about any of the above listed companies, please visit their web sites: http://www.mastercard.com; http://www.mistwireless.com; http://www.nbstech.com & http://www.bankislam.com.my.
ACT Canada is an international non-profit association for the advancement of card technologies. We work on behalf of our members to promote the awareness, understanding and use of all advanced card technologies; including optical, smart, capacitive and emerging technologies. If you would like to learn more about ACT Canada membership please visit http://www.actcda.com or contact our office at (905) 426-6360.
Please forward any comments, suggestions, questions or articles to andrea@actcda.com. If you would like to be removed from our newsletter distribution list please reply to this email with the word "REMOVE" in the subject field. Please note that articles contained in this newsletter have been edited for length.

Andrea McMullen
AVP
ACT Canada
tel: 905 426-6360 ext. 24
fax: 905 619-3275
email: andrea(AT)actcda.com
web: www.actcda.com
mail: 85 Mullen Drive, Ajax, ON, L1T 2B3