September 25, 2002
Welcome to the September 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. Airos Group Awarded Product Development Contract
3. Cobranding Key To Amex's Canadian Plans
4. ACT Event Confirms Issuers Interest In Moving Forward Smart Cards Plans
5. Visa Develops Payment Spec For Contactless Smart Cards
6. Australian Banks Plan Multiapplication Projects
7. Ingenico & Valutec Announce E-Gift Card Application
8. Thales E-Security Releases 2 New Versions Of Websentry
9. Frost & Sullivan Presents Philips With 1st Smart Card Competitive Strategy Award
10. BMO Launches Mosaik MasterCard
11. Access Will Overtake Transit As Main Contactless Card Application
12. MasterCard & Visa Reach Accord On Internet Security

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

GENERAL
Airos Group ~ new member
Gemplus ~ member since 1990
ONCE Corporation ~ new member

ASSOCIATE
SMART Toronto ~ new member

GOVERNMENT OBSERVER
Moving the Economy ~ new member
ACT CANADA - REGISTER OF ACHIEVEMENTS
STIMULATING MEMBER'S BUSINESS
Building Market Awareness

From Vancouver, BC to Kitchener, ON and points in between form the speaker's tour for the next month. It is our pleasure to address international card manufacturers, civic officials, law enforcement, federal government officials, hi-tech executives and business leaders in the upcoming weeks.

EXTENDING MEMBERS REACH & INFLUENCE

We are working with the Smart Choices initiative in British Columbia. On behalf of our members, we are negotiating participation in hands-on demos. We are also looking into the use of this facility to support our members from across Canada and abroad, so that they may have access to all our events, if they cannot attend in person.

ACT Canada is also pleased to announce it will exhibit at Cartes, in partnership with ICMA. At that time, we will sign the Charter for the formation of the International Smart Cards Association Network (ISCAN).

Market Research

We are currently conducting research on the issues, real or perceived, that negatively impact smart card rollouts. This is the first of many surveys planned for the coming year. Analyzed results will be made available of the October 29th Market Intelligence meeting.

PROTECTING MEMBERS INTERESTS

On October 29th, a broad group of issuers (current and potential) and industry representatives will meet behind closed doors to frankly discuss what needs to be done to facilitate advanced card application roll outs. A key element of the day will be the drafting of action plans to minimize or eliminate the top eight issues, as identified by our market research.

Government, financial and retail issuers have already registered for what will be an ongoing initiative. To participate, please contact ACT Canada at 905 426-6360.
1. EDITORIAL COMMENT
Source: Catherine Johnston, President & CEO, ACT Canada (09/23)
"Behind closed doors" is more than a popular television show. It is also where strategic plans are devised and kept secret until it is appropriate to announce them.

It is where many issuers have worked over the past two years. CIBC and American Express surprised the market when they announced the Entourage credit card. This month, Bank of Montreal launched the Mosiak card (see story this newsletter). While it does not use an advanced card platform, it is notable for breaking the mold in terms of customer options.

The Integrated Mobility Solutions consortium has released its plans for multi-application smart cards to "provide seamless, convenient, and enjoyable transportation from door to door" after studying similar systems in Hong Kong and Paris. This consortium is a part of the Moving the Economy initiative and includes partners from across Canada.

There are many other initiatives in the planning stages. One of the most interesting parts of my job is working with groups in these early stages. Confidentiality is always critical, but I can tell you that there is a lot of activity from groups that have previously watched from the sidelines.

Supporting these groups and building awareness with others is a key mandate for ACT Canada and we appreciate our members' support for these initiatives.
2. AIROS GROUP AWARDED PRODUCT DEVELOPMENT CONTRACT FOR LOYALTY PROGRAM INNOVATOR SMART CHIP
 Source: PRNewswire via COMTEX (09/05)
Smart Chip Technologies announced it has awarded a contract to the Airos Group for product development and integration services. The Airos Group is porting Smart Chip Technologies' e-llegiance(TM), for a loyalty program targeted for implementation in 1Q 2003.

Smart Chip Technologies is one of the founding members of the Solstice Alliance, which was formed to develop and market an Internet-capable, EMV debit and credit compliant multi-application smart card payment suite. The Airos Group is currently the prime integrator for an end-to-end multi-application smart card implementation. Previously, Airos participated in the "smart city" Barrie VISA Cash and Guelph/Sherbrooke Mondex trial with the development of both hardware and software solutions.

Airos Group is a member of ACT Canada. For more information about either of the above mentioned companies, please visit their web sites at http://www.airosgroup.com and http://www.smartchiptechnologies.com.
3. COBRANDING KEY TO AMEX'S CANADIAN PLANS
 Source: ICMA Daily News (09/13)
Though Canada is its fastest-growing foreign market, American Express Co. has less of the credit card pie there than in the United States, and it has set out to change the situation -- and to push its other products there.

Amex Canada Inc. has hired a leader who aims to introduce some of the strategies that have been successful in the United States, such as celebrity-endorsed cards. Early this year the unit cemented its partnership with Canadian Imperial Bank of Commerce, the first Canadian bank to agree to issue cobranded Amex cards (which double as smart cards).

Beth Horowitz, who was named Amex Canada's regional president and general manager in July, said in a telephone interview that her chief goals were to get more business from existing cardholders and to expand the company's noncard business.

For example, she cited the marketing deal that American Express made last year to offer products such as investment savings accounts to Costco Wholesale Corp. members. This "is one of many cross-sell opportunities we have in place," she said. "I can foresee a time when the first experience someone has with American Express is with a noncard product."

The Canadian card market is only around 6% the size of the U.S. market, and American Express lags Visa and MasterCard there. While Amex has a 16% credit card market share in the United States, its share in Canada is around 13%, according to the industry newsletter The Nilson Report.

In May, American Express introduced a product in Canada for which it has high hopes: The American Express Tiger Woods card, which features the golfer's picture. Every time Mr. Woods wins a major tournament -- as he did in June at the U.S. Open -- cardholders get 500 extra Membership Rewards points.

Golf fans are "an attractive demographic for American Express," and it will try to develop other niche products to attract new members, Ms. Horowitz said.
Kenneth Chenault, the CEO of American Express, has said that international account acquisition is a priority for growth, and Ms. Horowitz said that the Canadian unit will receive some help in the form of higher technology investments and a bigger marketing budget for brand-building.

Bradley Ball, an analyst at Prudential Securities, said that the Canadian market provides some distinct advantages to Amex in its quest to expand card and noncard revenues. One is the company's ability to sign up banks to issue cards through its network, he said.

"In arrangements they set up with local banks, they take the American Express brand and network and leverage the local bank's brand and access to the customer," he said.

Though Amex has long had such partnerships in 30 countries, it signed its first one with a Canadian bank only this year. An advertising blitz was launched after the partnership was announced in January, and Ms. Horowitz says that the partnership is doing well, though she would not elaborate.

Bank partnerships "will be important to American Express in terms of its international growth strategies," she said.

The cards being promoted through the partnership, CIBC's Entourage cards, come in consumer and business versions. They bear both magnetic stripes and microprocessor chips and come with a security program unique to Canada, LockIt, which lets customers use a card reader and PIN to make secure Internet purchases.

Before its deal with American Express, the Canadian bank offered only Visa cards; now it offers both Visa and Amex products. Unlike Visa U.S.A., which forbids member banks from issuing the American Express brand, Visa Canada allows it.

Ms. Horowitz suggested that the company's experience with chip cards might give it an entry point with other banks. "Canada is moving down that path" towards widescale chip migration, she said. "We will be an active participant as banks look at chip issuance."

The country's demographic profile suggests that residents may be more interested than their U.S. counterparts in using smart cards on the Internet. Two-thirds of Canadian adults have Internet access, according to Amex data. Around one-quarter of Canadian adults regularly make online purchases, and 24% bank online.

American Express Canada is a member of ACT Canada. For more information about either of the above mentioned companies, please visit their web sites at http://www.americanexpress.ca and http://www.cibc.com.
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. ACT CANADA EVENT CONFIRMS ISSUERS INTEREST IN MOVING FORWARD SMART CARDS PLANS
 Source: ACT Canada (09/24)
ACT Canada has received an enthusiastic response from the Issuers Community for the Market Intelligence Roundtable meeting scheduled for Tuesday October 29th, at the Metro Toronto Convention Centre.

They have expressed their excitement about this working session which will identify steps that will allow them to minimize/eliminate the obstacles so that they can move their card plans forward. They have expressed a desire to work with vendors in order to make this happen.

To date we have confirmed participation from the following issuers:

CIBC; Canadian Payments Association; City of Toronto; Credit Union Central of Canada; Imperial Oil Ltd.; Indian and Northern Affairs Canada; MasterCard; Ministry of Consumer & Commercial Relations; Passport Office; Petro Canada; President's Choice Financial; Retail Council of Canada; Retail Merchants' Association of British Columbia; Scotiabank; Treasury Board Secretariat; Visa Canada Association.

For more information about the event, please visit http://www.actcda.com/calendar/symposium.htm.
 
5. VISA DEVELOPS PAYMENT SPEC FOR CONTACTLESS SMART CARDS
 Source: epayment news(09/19)
Visa has developed a new payment specification for contactless chip cards, removing the need to physically insert a smart card into a reader.
Visa says the new specification, designed to work side-by-side with conventional chip and magnetic stripe technologies, will support the cross-over of payment cards into the contactless arena.

Based on an international standard, ISO 14443, the new specification uses a chip embedded in a plastic card or an electronic device, such as a mobile phone. The card, mobile phone or other device is then held in front of a terminal and a wireless interface transits the payment information.

The spec is expected to get its first outing in Korea, where telecommunications company SK Telecom has been working with Visa to test the viability of infrared payment for mobile phone users.

Visa Canada is a member of ACT Canada. For more information, please visit their web site at http://www.visa.ca.
6. TWO AUSTRALIAN BANKS PLAN MULTIAPPLICATION PROJECTS
 Source: CardTechnology Magazine (08/30)
Two more of Australia's Big Four banks will follow ANZ into the market with multiapplication chip cards, sources tell Card Technology. Westpac Banking Corp. firmed up plans to launch a smart card similar to the First card introduced last fall by ANZ, which carries a credit application complying with international EMV standards, along with loyalty and Internet security features, the sources say. Unlike, the Visa-branded First card, however, Westpac decided to fly its chip card under the MasterCard banner, presumably using Multos multiapplication software. Another bank, either Commonwealth Bank or National Australia Bank, also has a multiapplication chip card on the drawing boards, although it was unclear which one. "Within 12 months, you'll see three of the major four banks with chip products," says an Australian banking industry source who asked not to be named. David Hisco, ANZ's general manager of merchant payment solutions and smart cards, says Westpac's plans show that the bank is worried about the First card, which has attracted 350,000 cardholders since the launch. "It supports our view that moving to chip is the right thing to do," he tells Card Technology. Many in the global payment card industry are skeptical about the business case for multiapplication EMV cards, and it's too early to tell whether the value-added services ANZ offers on the First card will justify the investment. Fraud, relatively low in Australia, is not considered a sufficient case by itself for rolling out smart cards and terminals, at least not yet. Hisco says ANZ plans to expand the card's features over the next 12 months, and at least a couple of the bank's rivals appear ready to follow.

MasterCard Canada and Visa Canada are members of ACT Canada. For more information about either company, please visit their web sites at http://www.mastercard.ca and http://www.visa.ca.
7. INGENICO & VALUTEC ANNOUNCE ELECTRONIC GIFT CARD APPLICATION
 Source: PRNewswire via COMTEX (09/12)
Ingenico and Valutec Card Solutions jointly announced the completion of an IP (Internet Protocol) capable gift card system installation at Pinehurst resort in North Carolina. The Valutec gift card system, running on the Elite 510 EFT POS terminal, is installed at over 40 points of service throughout the resort. ClubCorp, located in Dallas, manages the Pinehurst Golf Resort and is the world leader in delivering golf, private club, and resort experiences. Internationally, the company owns or operates more than 200 golf courses, country clubs, private business and sports clubs, and resorts.

Club Corporation is projected to roll out the Valutec 510 IP electronic gift card system to other nationally recognized golf properties ClubCorp manages. The company's 23,000 employees serve the 500,000 club members and 250,000 guests who visit ClubCorp properties each year.

Ingenico Canada is a member of ACT Canada. For more information about either of the above mentioned companies, please visit their web sites: http://www.ingenico-ca.com and http://www.valutec.net.
8. THALES E-SECURITY RELEASES 2 NEW VERSIONS OF WEBSENTRY
 Source: CCNMatthews via COMTEX (09/13)
Thales e-Security has launched 2 new versions of its WebSentry hardware cryptography platform for SUN Solaris and Linux operating systems. Application developers using WebSentry are able to develop a wider range of high-security applications, extending the reach of their security implementations. WebSentry, Thales e-Security's e-Business hardware cryptography platform, will now also enable systems integrators to offer far more choices to their customers.

WebSentry now enables SUN Solaris and Linux users to take advantage of its inherent high security, certified to the highest standards such as FIPS 140-1 (FIPS 140-2 pending), as well as its intrinsic cryptographic acceleration, with optimized dedicated devices that offload the burden of security out of the application and database servers. WebSentry's scalability comes from an integral cluster approach that permits the performance to grow with the application needs, without a change to the calling application. In addition, this integral cluster approach offers high availability of service, with automatic redundancy.

For more information about the above mentioned company, please visit their web site at http://www.thales-esecurity.com.
9. FROST & SULLIVAN PRESENTS PHILIPS WITH FIRST SMART CARD COMPETITIVE STRATEGY AWARD
 Source: PRNewswire via COMTEX (09/16)
Frost & Sullivan announced that Philips received the Frost and Sullivan 2002 Competitive Strategy Award for innovation and unparalleled growth in the global smart card arena. This accolade is the first of its kind given to a company in the smart card market and has been presented to Philips in recognition of its move into the number two position worldwide for the supply of smart card chips.
Philips' tremendous 80 percent increase in semiconductor revenues for the chip card market during 2001 surpassed all other competitor efforts in the smart card market. The company moved into the number two position in a category comprising all types of smart card ICs.

Philips' achievement is mainly based on its strong position in the banking and transport markets. The business saw an impressive growth in the banking smart card world based upon its success with the VISA-Java card program in addition to its excellent performance levels in the transport arena with its MIFARE(R) technology -- with the shipment of Philips' 200 millionth MIFARE(R) smart card. Philips has also experienced a growth in the SIM card market.

For more information, about either company please visit http://www.frost.com and http://www.semiconductors.philips.com.
10. BMO LAUNCHES MOSAIK MASTERCARD
 Source: Bank of Montreal (09/05)
The Bank of Montreal (BMO) is revolutionizing the credit card industry with the introduction of Mosaik MasterCard - a card that customers can build and re-build themselves.

Mosaik allows customers to build their own customized cards by choosing and paying for only the rewards, features and rates they want. Customers can also re-build their cards by changing the features as their needs change without having to replace the card or apply for a new one.

Unlike other credit cards that offer a limited selection of pre-bundled options, Mosaik MasterCard lets cardholders choose from a variety of individual features such as the AIR MILES Reward Program or a CashBack Reward Program, Travel Protection, Travel Medical, Concierge Service and either a standard or low interest rate. Customers can even pick their card design.

Research shows that many cardholders are paying for features they don't use and currently hold up to 3 different credit cards* in order to have all of the features they want.

MasterCard Canada is a member of ACT Canada. For more information about either of the above mentioned companies, please visit their web site at http://www.bmo.com and http://www.mastercard.ca.
11. ACCESS WILL OVERTAKE TRANSIT AS MAIN CONTACTLESS CARD APPLICATION
 Source: CardTechnology (09/12)
Use of contactless smart cards will grow sharply over the next few years, with access control overtaking transit as the main application by 2006, according to a report by London-based research organization Datamonitor. The value of contactless smart cards sold will grow from $110 million in 2001 to $615 million in 2006, according to the report. In terms of unit shipped, contactless cards will grow from just under 100 million cards this year to about 280 million in 2006, according to analyst James Adams, author of the Datamonitor report entitled "Proximity Payments". While fare cards led access control by last year, with $55 million worth of cards sold for transit compared with $40 million for access, by 2006 the market for contactless cards for entering buildings and other facilities will be $225 million, compared with $200 million for public transit, says the report. Contactless cards operate by radio signals, and need only be waved within a short distance of a reader. Conventional contact cards, which are inserted into card readers, still represent more than 95% of the 2002 smart card market of $4.3 billion in 2002. But the contactless portion of the market is growing at twice the rate of contact cards, says Datamonitor.
12. MASTERCARD & VISA REACH ACCORD ON INTERNET SECURITY
Source: CardTechnology Magazine (08/29)
Heading off a clash of incompatible technologies, MasterCard International and Visa International have agreed to converge their competing systems for authenticating cardholders shopping on the Internet and promote a common standard. In addition, Visa and MasterCard plan to develop an Internet authentication standard available to all card brands. "We would invite others, like Discover and AmEx, into this," says Art Kranzley, chief e-business officer at MasterCard. With the convergence, consumers, issuers and merchants will be able to use a single system for both card brands. For the past year, Visa and MasterCard had been promoting competing technologies for authenticating consumers online.

The card associations tried once before, in 1996, to promote a common Internet security protocol called SET, but merchants rejected it as complicated and expensive. This time it could work, says analyst Jeanne Capachin of Newton, MA-based Meridien Research. "There's a lot of momentum behind it," she says. But Avivah Litan, an electronic commerce specialist at Stamford, CT-based Gartner, says big online merchants remain skeptical that these authentication systems will reduce their fraud losses.

Both systems leave it up to the card issuer to decide on the form of consumer authentication, but at least in the early stages the consumer is expected to enter a password into a pop-up screen before completing a card purchase. At least one North American issuer is testing the use of Verified by Visa with smart cards, says Naftali Bennett, CEO of New York-based Cyota, which says it is operating Verified by Visa systems on the part of 15 large issuers in North America, the United Kingdom and Japan. This would require a consumer to insert the chip card into a reader attached to a personal computer and then enter a password.

MasterCard Canada and Visa Canada are members of ACT Canada. For more information about either company, please visit their web sites at http://www.mastercard.ca and http://www.visa.ca.
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
</