A smart card looks similar to a credit card, only with a computer chip inserted on it’s surface. Most smart card chips are about the size of a 5 cent piece, and can be recognised by their usual gold or silver ‘terminals’ that look like mini printed circuit boards.

A smart card chip is really a mini computer with nonvolatile memory, a database, an operating system, and various communication systems. In one way the new cutting-edge smart card chips are as powerful as the early IBM PCs, except they don’t have a keyboard or monitor.

Smart cards have numerous different uses and can be used in the following ways:
* ID cards that are able to identify the owner using advanced authentication algorithms and can safely store confidentail infromation like private keys, private information and unique identifying data
* Activity cards that are a more cutting-edge version of the magnetic stripe usually found on credit cards
* Electronic wallet cards that use differing methods to acquire value and provide a kind of electronic cash
* Processor cards that carry out proprietary calculations in a black box fashion
* Memory cards that can act as portable databases

Smart cards require a terminal in order to function, usually called a smart card reader, or in some countries a card access device. Smart card readers can come in many froms and range from point of sale terminals such as EFTPOS terminals in Australia, through to the specialised modules attached to standard computer terminals.

Smart cards contain the capability to accumulate abundant pieces of information and multiple layers of data. For example, a single smart card could store multiple bank account access details, loyalty programme memberships and government health card data. In Australia so far, smart cards tend to be limited to single purposes or to provide particular functionality.

Smart cards also accommodate much stronger levels of safety than older magnetic striped type cards. Smart card chips have inbuilt security mechanisms that protect the data that is embedded within the chip. This makes smart cards the first choice for governments and large organisations that are seeking highly secure and data rich card systems in order to provide services to the public and employees. Alongside much lower levels of identity fraud and the associated costs, smart cards save governments, businesses and organisations from surplus costs usually associated with data and identity fraud. It also means that service providers can administer more targeted services and lower their customer and consumer relationship costs.

Another imminent application of smart cards is in verifying identity – PKI identification is a rapidly growing area of smart card applications and is used by many organisations and governments around the world. Many countries now use this kind of kind of smart card for drivers licenses, where the drivers identity, driving records and overdue fines can be held for example, along with medical information which can be useful after car accidents.

In Australia especially, smart cards are now frequently used for bank and credit cards, allowing users to perform any kind of financial transaction at merchants and ATM’s using the improved security furnished by the smart card. These cards also appear with the traditional magnetic stripe so that they can be read by older readers. Over time, ATM and credit cards will only use the smart card chip without the less secure magnetic stripe.

For their collection of benefits and capability to effectively cut operating costs and provide enhanced security, smart cards are fast becoming the leading form of electronic and identity transmission media today.

Jorgen Tallisford is from Cardpro, a leading card manufacturer who specialise in smart card and loyalty card applications and manufacture.