August 27, 2002
Welcome to the August edition of ACTion News. Our newsletter is distributed each month in order to keep you up to date with events in the advanced card industry. This complimentary service is provided by ACT Canada; "building an informed marketplace". It is also available in the Resource Centre of our web site http://www.actcda.com. Please feel free to forward this to your colleagues.


IN THIS ISSUE:
1. Editorial Comment
2. Scan Eyes, Fingerprints Of Airport Employees, Say Pilots
3. City Of Toronto Awarded Funding To Study Smart Cards
4. Card Fraud In The UK On The Rise
5. Canadian Bank Note Company Ltd Co-Designs Permanent Resident Card
6. U.S. Treasury Employees To Use Smart Cards
7. European Truckers To Be Outfitted With Smart Cards
8. EquinePassport™ Smart ID Card Features Patented Loyalty Application
9. CPI Offers 99-Cent Smart Card
10. Three E-Purses In Korea Agree To Share Terminals
11. JCB Exceeds 3 Million IC Cards Issued

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

PRINCIPAL
Giesecke & Devrient ~ member since 1990

ASSOCIATE
Retail BC ~ new member, representing 3500 retailers in the province of British Columbia

ACT CANADA - REGISTER OF ACHIEVEMENTS
STIMULATING MEMBER'S BUSINESS
Building Market Awareness

Identity theft and the role of smart and laser card applications to protect consumers and citizens continue to be a focus for ACT Canada. Technology in Government published a feature article on this problem after being briefed by ACT Canada earlier this summer. CHCH TV (Hamilton, Ontario) interviewed Catherine Johnston on their morning news show, and were shocked to learn that there has been a 100% growth in North American thefts over a three month period, according to FBI reports.

Check our web site for 2 new articles; a White Paper on border security (in articles) and the text of a speech to the International Trade Club of Toronto (in presentations). This speech examines the connection between e-terrorism, privacy and trade; as well as warnings to consumers about recent common scams.

EXTENDING MEMBERS REACH & INFLUENCE

Last month we alerted ACT Canada members to a smart card based ID card opportunity. We also answered market place inquiries concerning loyalty, payment and security applications and resources.

Market Research

What do card issuers want and need? What issues are they facing and where can they go to seek help? ACT Canada will take a snapshot of the market in October. One part of the program is to help governments, retailers, financial institutions, transit organizations and others, deal with issues of privacy, business rationales and cases, infrastructure and corporate and consumer awareness. For more information, please contact info(AT)actcda.com
1. EDITORIAL COMMENT
Source: Catherine Johnston, President & CEO, ACT Canada (08/26)
Where do you go when you want to know something about a technology? If there is an association representing that technology, it's a good place to start and ACT Canada answers questions daily. Some are about technology, others about issues, the market or opportunities. For every question we answer, we learn something. Each is a piece of a large puzzle that represents the Canadian and global marketplace. We get to see both trends and issues as they emerge.

Last month we asked in this editorial what issuers want and promised to talk more about it this month. We asked our members of the National Infrastructure Forum and found that one of their significant needs matched one identified by Global Platform: interoperability enabling "any card, any terminal, any application".

This level of interoperability is the goal of the members of Global Platform. Their mission is to establish an open smart card infrastructure that enables Issuers from many industries to deploy and manage multiple applications through a variety of devices for their customers.
In other words, compatibility and interoperability among applications, cards, devices and systems.

We applaud their work. It will bring growth to the marketplace and industry. Developers, investors and issuers will all have an increased confidence in the future of the market, much in the same way as we saw in the PC marketplace as open systems and interoperability emerged. For more information about Global Platform visit www.globalplatform.org.

What else do issuers want? Tune in next month as we prepare to take a marketplace snapshot.
2. SCAN EYES, FINGERPRINTS OF AIRPORT EMPLOYEES, SAY PILOTS
Source: CBC News (08/15)
The International Airline Pilots Association says there are too many gaps in security at Canadian airports. It wants high-tech equipment to scan the eyes and fingerprints of airport employees.

Representatives of the association appeared before a Senate Committee hearing on national security. They say it's still too easy for potential terrorists to get close to airplanes.

Senior representative Art LaFlamme says security ID for restricted areas can be counterfeited. "Right now, as we know, documents can be forged, and it's a very serious matter to let a person who … shouldn't be there, close to an aircraft," said LaFlamme.

He says airports should use biometric identification equipment to recognize employees' fingerprints and faces. The Senator says LaFlamme's testimony will be part of the recommendations the committee will eventually pass on to Parliament.
3. CITY OF TORONTO AWARDED FUNDING TO STUDY SMART CARDS
 Source: Canadian Newswire (08/06)
Moving the Economy (MTE), a program of City of Toronto Urban Development Services in partnership with the Toronto Atmospheric Fund, received $41,250 to assess using smart card technology to stimulate and support the delivery of sustainable, multi-model transportation services to the Greater Toronto Area (GTA).

The MTE study will include assessing the emissions reduction potential and investigating the technical and financial feasibility of developing and implementing Integrated Mobility Systems (IMS) - an innovative system for improving, marketing and integrating transportation choices - on a regional basis in the GTA. The study will assess the potential for IMS to access and link a wide range of urban and inter-city transportation modes, tourist and other urban services using smart card technology.

For more information about the City of Toronto's initiatives, please visit their web site at http://www.city.toronto.on.ca.
CardTech/SecurTech ID: "Identification Technologies for a Secure World", is scheduled for November 18-20, 2002, at the Renaissance Hotel in Washington, DC.

CardTech/SecurTech ID will focus on the critical ID initiatives facing the government community committed to heightening homeland security, as well as the smart card, biometrics, and IT vendor communities that support these government efforts.

For more information about the event, please see the attached brochure, or visit http://www.ctst.com for online registration and agenda details.
4. CARD FRAUD IN THE UK ON THE RISE
Source: epayment news (08/10)
UK payments body Apacs is warning of a new threat to credit card security as sophisticated criminal gangs use the Internet to create multiple counterfeit cards for simultaneous use in foreign countries.

Card fraud abroad is rising dramatically, especially in Spain, France and the US, with tourists seen as a soft target for pickpockets and thieves. But it's not just holidaymakers' cards that are being hit, says Apacs. Those at home in the UK are increasingly finding that their card details are going overseas without them.

In fact fraud losses on UK cards used abroad by criminals are up by 34% costing £138m last year, with the biggest losses occurring in Europe, £77 million (up 36%).

Apacs says sophisticated criminal networks involving staff at local petrol stations, shops or restaurants are skimming customer cards. In a new trend, the details are being sent abroad via the Internet where counterfeit cards are created and used to buy goods in several different countries simultaneously within hours.

A police unit chiefly funded by Apacs has been set up as a two-year pilot to fight organised card criminals and since its inception in April 2002 has cracked several international counterfeiting groups says the payments body.

But the biggest defence against card counterfeiting lies in the introduction of highly secure chip cards, says Apacs. By 2005, every UK cardholder will be using one alongside a PIN (personal identification number) to identify themselves instead of a signature. This system is expected to more than halve predicted fraud losses in the UK.
 
5. CANADIAN BANK NOTE COMPANY LTD CO-DESIGNS PERMANENT RESIDENT CARD
Source: ICMA Daily News (08/22)
Citizenship and Immigration Canada's new high-security proof-of-status cards for permanent residents are now being issued from Canadian Bank's secure central service bureau in Ottawa, Ont.

Citizenship and Immigration Canada, and Canadian Bank Note (CBN), together designed the new Permanent Resident Card. Following the processing of applications by Citizenship and Immigration Canada, approved records are securely transmitted to CBN. CBN provides the systems integration, prints and supplies the cards, and personalizes and distributes the card, all within its high-security facility in Ottawa.

"The production of the Permanent Resident Card by Canadian Bank Note Company and its subcontractors supports the government of Canada's commitment to ensure our immigration documents and borders are more secure," stated Citizenship and Immigration Minister, Denis Coderre.

Upon its recent introduction, the new cards not only became the most secure of its type in Canada, but also amongst the most secure in the world. In addition to a full array of security features and a durable polycarbonate-based construction, the cards are personalized with a laser-engraved photo and biographical data. The cards also contain an optical memory stripe on which is stored data relevant to the holder's arrival in Canada.

LaserCard Systems Corporation will deliver 2.3 million optical memory cards over the next 5 years as part of the Canadian Permanent Resident Card Program. Information about the program can be found on the Canadian gov't web site at http://www.cic.gc.ca/english/pr-card/prc-about.html. As noted in our Register of Achievements, ACT Canada has recently added the LaserCard white paper to the Resources section of our web site - http://www.actcda.com/resource/articles.htm.

LaserCard Systems is a member of ACT Canada. For more information about the above listed companies, please visit their web sites: http://www.lasercard.com and http://www.cbnco.com.
6. U.S. TREASURY EMPLOYEES TO USE SMART CARDS
 Source: CardTechnology (08/13)
Starting this fall, 9,000 of the U.S. Department of Treasury employees will start using a smart card to enter their workplaces and log onto their computer networks. The Secret Service, Bureau of Alcohol, Tobacco and Firearms, the Federal Law Enforcement Training Center, the Bureau of Engraving and Printing, the Internal Revenue Service, and the Treasury Department offices will participate in the rollout. Called the E-Trec card, it will feature a dual-interface chip that will act in contactless mode for physical access and contact mode for logging onto computer networks, says Mike Brooks, director of the Center for Smart Card Solutions for the U.S. General Services Administration. The Treasury Department will determine on a case by case basis whether to replace existing systems used for physical access with the dual-interface chip card and readers, says Brooks. "This is a big organization," he says. "It would cost them millions of dollars to strip out every legacy system." The 32-kilobyte chip also will store the cardholder's fingerprint data for authentication, and a digital certificate for digitally signing and encrypting electronic documents. The GSA awarded the $1.4 million contract, which includes cards, readers and applications, to Maximus Inc., one of four systems integrators selected under its Common Access ID Contract to implement smart card programs for government agencies. The Common Access ID Contract lists specifications for cards, readers, and other equipment so vendors can make their products interoperable, says Brooks. The GSA provides equipment and services for the office operations of more than 1 million federal workers located in 8,300 government-owned and leased buildings.
7. EUROPEAN TRUCKERS TO BE OUTFITTED WITH SMART CARDS
 Source: CardTechnology (08/06)
The European Commission will use high-end smart cards to keep track of whether truck drivers are spending too many hours on the road or flouting speed limits. The EC is mandating that, starting in two years, all new trucks registered in the European Union come equipped with smart card readers as part of new digital recording equipment. The digital equipment will replace more easily fooled mechanical "tachographs" now common on trucks in Europe to keep tabs on truckers. The smart cards will store digital certificates on each driver, who will authenticate himself to the recording equipment by inserting his card into one of two slots in the reader before hitting the road. The cards, which will be issued by government agencies within the EU's 15 member states, will also store driver's license information and record such data as the distance the driver traveled during the day and any attempts made to tamper with the motion detector or other parts of the recording equipment. Police officers who conduct road checks will get their own cards, which they can insert into the reader's second slot to access data both on the driver's card and the recording equipment itself. "The data cannot be manipulated as it can be today, and the (driver's) card can be verified," says Andreas Schauer, a product manager for Munich-based card vendor Giesecke & Devrient. "It's not possible to produce a fake card--not without a reasonable amount of work." Of course, the system isn't foolproof. Drivers don't need to enter a personal identification number and could use their colleague's card to extend their time behind the wheel. The EU will not require older rigs to be retrofitted, so many truckers could go several more years without carrying the new tachograph cards at all. Still, the project is considered important, in part because the cards will support sophisticated encryption technology. "It's a PKI card, and the market for PKI cards is not that big," says Schauer, who estimates agencies will issue as many as 10 million digital tachograph cards over the next five years. In addition to drivers and officers, representatives of trucking companies and equipment repair shops will also get cards. Besides G&D, at least one other card vendor, SchlumbergerSema, will seek to supply the cards.

Giesecke & Devrient and SchlumbergerSema are both members of ACT Canada. For more information about either company, please visit their web sites: http://www.gdai.com and http://www.slb.com/smartcard.
8. EQUINEPASSPORT™ SMART ID CARD FEATURES PATENTED LOYALTY APPLICATION
 Source: SCTN (08/23)
Smart Chip Technologies announced that DynCom, Inc., an innovator in the animal identification market, has contracted to license the SCTN loyalty patent and related software in order to develop and market multi-application EquinePassport™ smart cards with cardholder loyalty programs.

DynCom will integrate the end-to-end loyalty system with other EquinePassport™ identification and medical applications. While the USDA's 2003 deadline for paperless health certificates is driving the demand for smart card-based animal identification, the EquinePassport™ will promote card usage through exclusive cardholder discounts and promotions. With discretionary spending in the equine industry exceeding $120 billion/year*, association / product / service rewards programs have a powerful draw for cardholders.

Of the 7.1 million Americans involved with 6.9 million registered U.S. horses*, 58% of horse owners use a unique identification for at least one of their horses, according to U.S. Department of Agriculture data. DynCom's EquinePassport™ smart card will be 100% interoperable with identifying technologies and presents the most secure, economical, and convenient method for the administration of animal health and identification records.

Depending upon owner needs and a horse's value, the EquinePassport™ can be customized to include the most basic owner and animal identification data (including health certification and Coggins test results) to more sophisticated cards featuring information such as horse photographs, detailed health and pedigree certification, multiple biometric identifiers, event and prize records, facility access, association membership, stored value, and cardholder loyalty programs. The EquinePassport™ system will also interface with the EquinePassport™ website and DynCom's backend database, in addition to other records systems as needed. Post-issuance updates will be available to insure that EquinePassport™ cardholders will have access to the latest identity and loyalty programs, and is engineered for Global Platform open industry standards to insure interoperability with applications such as electronic payments.

DynCom is currently in discussion with several breed registries and state organizations regarding EquinePassport™ pilot program participation, with an anticipated circulation of more than 200,000 cards by December 31, 2003.

Smart Chip Technologies is a member of ACT Canada. For more information, please visit their web site at http://www.smartchiptechnologies.com.
9. CPI OFFERS 99-CENT SMART CARD
 Source: CardTechnology (07/24)
CPI Card Group announced its offering Visa International's 99-cent smart card. CPI plans to market the card, which only carries Visa's debit and credit application, to Visa issuers overseas that are migrating to chip cards in order to combat fraud. Since card fraud in the United States at the point of sale is only about 7 basis points of sales volume, so far card issuers here have elected for more expensive smart cards that carry nonpayment applications, such as loyalty. These cards start at $2.89 each, according to Visa U.S.A. But the single-application card may be appealing to U.S. issuers that find the multiapplication cards too expensive, says a CPI spokesperson. Visa added the 99-cent smart card to its portfolio last summer. The card carries chips from ST Microelectronics, and it uses an operating system from IBM Corp.

CPI Card Group is a member of ACT Canada. For more information about CPI, please visit their web site at http://www.cpicardgroup.com.
10. THREE E-PURSES IN KOREA AGREE TO SHARE TERMINALS
 Source: CardTechnology (08/02)
South Korea's absurdly overcrowded electronic-purse market may be getting a modicum of order. Three e-purse scheme operators and a large transaction processor have agreed to develop a new point-of-sale terminal that will accept all three brands. The initiative is reportedly being spearheaded by Visa Cash, one of several e-purses in the market vying for both transit fare collection and, more lucrative, retail purchasing business. Besides Visa Cash, the new terminals will accept the A-Cash and Mondex e-purses. The Korea Information & Communication Co. Ltd. will develop the terminals and process the transactions. Paul Jung, director of product marketing and emerging technology for Visa International's Korea office, says Visa is opening up at least 1,600 of its retail terminal locations by year's end to its rivals for the sake of the health--some might say the survival--of the segment. "For Visa in Korea, forming an e-purse market together is more valuable rather than competing or wasting cost on infrastructure." He says transaction times on the common terminals will not increase substantially. Two other Korean e-purses, the government-backed K-Cash and Pusan-based Mybi, are not part of the terminal-sharing agreement. But observers who believe the agreement represents a calming of the country's wide-open e-purse wars should think again. Two more e-purses have reportedly been launched recently, one by a group of banks and credit card companies and the other by the country's largest Internet service provider.
11. JCB EXCEEDS 3 MILLION IC CARDS ISSUED
 Source: JCN Newswire via COMTEX (08/07)
JCB, Japan's largest credit card company and an international brand, announced that the total number of JCB-brand EMV IC cards issued in Japan since December 2001 exceeded 3 million in July 2002.

Equipped with the JCB EMV credit payment application "J/Smart", JCB's smart card issuing to cardmembers in Japan was launched commercially after undergoing successful pilot projects, including the Postal Savings project in Omiya City, near Tokyo, and the Electronic Toll Collection systems for highways in Japan.

By the end of March 2003, JCB expects to have issued more than 10 million smart cards, meaning JCB smart cardholders will make up 20% of all JCB members. JCB plans for EMV-based JCB IC migration to be complete by the end of 2006.

As well as incorporating the regular advantages of smart cards such as improved security, JCB's J/Smart IC cards will also feature multiple applications to improve user functionality for even better customer satisfaction, including contactless applications for transport and ticketing systems, loyalty applications and electronic money.

Outside of Japan, at the same time, JCB has been extending the JCB brand network for EMV migration.

In March, 2002, the first JCB IC transaction outside of Japan was successfully processed at a point-of-sale located in the UK, confirming the cross-border inter-operability of J/Smart . JCB plans to expand EMV acceptance to other countries by the end of this year, and also expects to have J/Smart- based JCB cards issued outside of Japan very soon.
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