Are smart cards going to outsmart us?


By Richard Giles

Get set for a credit card that is so smart it will be able to pay for goods at a distance with just a wave of your hand.

If you have a credit card or ATM card today, you can feed them into an automatic teller and they'll access your cash (if all goes well), or they can be used at the supermarket or bank to record your name, address and number.

But imagine a card that holds a hundred times more information than your magnetic strip Phonecard or Bankcard. Imagine a card that will allow you to buy petrol by waving it in front of a scanner, a card that contains your fingerprints, medical records, bank records, key details of personal history, any criminal record and more.

Old style cards like Visa or Phonecard can hold some 200 bytes of data — equivalent to 200 letters or numerals. Smart cards right now can hold the equivalent of tens of kilobytes of data (one page of Green Left Weekly contains 9 to 10 kilobytes).

The smart card is fitted with a tiny internal aerial which can broadcast a signal or pick up signals from a card reader such as at a petrol pump or toll booth. Cards that can be read at a distance are already on trial in England. London transport is evaluating smart bus passes on a number of its routes. When passengers climb on the bus, they pass their card in front of a reader, which deducts the cost of the fare from the stored credit.

France has been using smart cards since 1992; its 21 million bankcards are smart. Card readers in shops provide an on-line connection to the bank, and card holder verify that they are entitled to use the card by entering a PIN number into the terminal.

If the PIN does not match, the reader tells shop staff to seize the card. Very soon the automatic card reader will be able to electronically disable a suspect card. The French claim that smart cards have reduced fraud at point of sales by 50%. This is because fraud can be detected instantly rather than waiting till the close of business.

British Telecom has announced that in 1995 it will be switching to smart phonecards. British Gas has developed a smart card that reduces fraud. The customer pays for credit and has the card charged in an office or showroom, taking it home to operate the gas meter. The meter deducts credits according to the amount of gas consumed and the monthly rental. When it's exhausted, the consumer takes it back to the showroom where it will be recharged. The card will also relay a message to the office if the meter has been tampered with.

In at least 15 countries there are plans to use smart cards for electronic transfer of funds for purchasing. The card stores electronic cash, and card scanners in shops transfer credits from the customer's card to the electronic till. When the card is empty, the owner can recharge at the bank or via the telephone.

In New Zealand the new smart card was offered to customers for the first time in 1994. It works the same way as European cards, with prepaid credit entered on the card's computer chip by banks.

Banks in Australia are putting in place policies that push the customer towards electronic transactions. Some banks now penalise customers using over-the-counter transactions to deposit or obtain money. The Commonwealth Bank, for example, charges customers who make more than three counter transactions in a single month. Other banks are following suit.

A report in the Sydney Morning Herald of February 15 quoted a "Technology In Banking" survey by industry group Ernst & Young. It reports 40% of Australia's retail banking transactions are done today by computer or phone. This will rise to 56% by 1997. Counter transactions are expected to decline by 30% in three years.

The survey stated that EFTPOS (which allows people to pay on keycards and withdraw cash via supermarkets and retail outlets) will grow rapidly in the next few years. EFTPOS transactions are expected to grow 50% by 1998. The trend is towards phasing out people in banking and moving to ATMs. Accounts will be opened and loans applied for via ATMs in just a few years.

Australian smart card

Our smart card, called the Stored Value Card was launched on December 13. It can be recharged at ATMs and purchases fast foods, confectionery, cinema tickets, newspapers, bus, rail and ferry tickets and other small value items. The consortium behind the card is QuickLink Card Systems, made up of Optus, ERG Australia (an electronics group) and information technology company Fujista.

CityRail and the State Transit Authority are involved in trials in Newcastle beginning in June. McDonald's, KFC, Coca-Cola Amatil and BP have all indicated they will become involved soon.

The other card being trialled in Australia is called Transcard. It is referred to as a "contactless" card, meaning it uses a radio frequency to pay for goods and services when it is passed over an electronic reader. Transcard is being tested in NSW with bus and taxi services. Transcard has also signed deals with McDonald's and retail outlets such as newsagent chains.

The smart card can simplify daily life. No more panicking when you run out of cash. No more being stuck without notes for petrol at the late night service station. No more writing cheques, enclosing accounts and posting payments. All these problems can resolved with the smart card. And you can have a monthly update on every transaction you make on statements.

However, if you can get that, so can the companies and banks which control the smart card system. And if they want to, they can sell it to another financial or government agency.

In federal parliament on June 12, 1986, the Technological Change Committee of ASTEC (Australian Science and Technology Council) tabled its report on the EFTPOS system (Electronic Funds Transfer at Point Of Sale). The report stated:

"Governments could profit from the type of information generated through EFTPOS and related systems. EFTs could also save the government departments much routine information processing, especially in dealing with welfare payments. As a large proportion of benefits are now paid directly into bank accounts, the links are there for banks, for example to contract to transfer other information such as change of address or status once, instead of both banks and government departments duplicating these administrative details.

"The ability of EFTPOS to provide information could also be used. If it were used universally, EFTPOS could provide unobtrusive means for the surveillance of all actions involving purchases. This could be achieved through using computers to amass individual profiles of consumer spending, including times, place, items bought and so on. In this way income could be matched with expenditure."

Global links

Australians have access to more EFTPOS facilities per capita than any other Western nation. In 1990 there were 15,739 terminals throughout Australia, recording more than 61 million transactions. By 1994 there were 42,370 terminals with more than 245 million transactions. Banks expect there to be 60,000 terminals by the end of this year.

By March 1988 all banks, building societies and major credit unions were linked together on one electronic system. Australian banks are now linked electronically to every major bank in the world through the global Electronic Funds Transfer (EFT) system.

Australia was also the first to make many of its point of sales networks part of a national link-up system. Computers owned by the financial institutions are connected to terminals at point of sale in major retail outlets; this in effect converts shop counters into electronic bank branches.

Telecom is also linked in here because point of sale terminals and bank computers are carried through a multiplexer located in Telecom exchanges. (A multiplexer is a device using and controlling multiple communications channels simultaneously.)

The use of fees to force non-users of ATMs into electronic banking is part of policy. Eventually the system will be made so simple and practical, you'll begin to feel like a fool or an idiot if you don't use it.

Your life on file

The fantastic, and insidious, use of the EFTPOS system combined with the smart card technology means that every transaction done via ATMs, smart card or other electronic means is recorded. The more you use the electronic system, the more of your daily finances are recorded.

Eventually, there is nothing in your financial dealings that will not be recorded. By checking your petrol purchases, a government agency will be able to work out how far you are driving a week and where you go. By looking at your supermarket purchases, it will be easy to see what type of diet you have and whether you go for luxuries or staples. By checking your department store records on screen it will be possible to deduce things about your lifestyle. And scanning through bookshop and newsagent purchases will make your reading patterns and preferences very obvious.

This smart technology amounts to a very sophisticated surveillance system that can give banks, financial institutions and government agencies a complete picture of who you are, what you do each day, where you go and how you live.

Yet it seems so convenient and easy. "If you can get to a phone, you can get to a bank", says the Westpac phone banking brochure. No cash and lots of plastic. The price we may be paying for this technology could be a total loss of privacy. Any institution with computer terminals and access to the system will be able to lay your life out on a print-out.

There are few laws governing the use of information gained through collection of data on spending patterns. As we saw earlier, the federal Committee on Technological Change advocated the use of electronic cash systems to collect this data. How much faith do you have that the information won't be used to spy on consumers? Civil liberties and consumer protection groups point to the lack of control over data privacy in a such an extensive electronic cash system.

It's very important to be informed of the implications of electronic cash and data collection so that you can make the choice to take part in the system or not. As the smart card takes over, it's good to be clear on what you may let yourself in for if you say yes to electronic money.

Big Brother is not some vague threat in the future; his technology is here and being implemented right now in the name of convenience. If we choose it, we may have sold our rights for a piece of plastic — a smart one at that!
[References: "Smarter Yet And Smarter", B.Fox, New Scientist, October 15, 1994; "Card To Replace Cash For Cheapies", R. Wainwright, Sydney Morning Herald, December 13, 1994; "Goodbye To Cash", A. Cathro, Daily Telegraph, February 15, 1995; "Countdown To Big Brother", S. Bryce, Nexus magazine, July-Aug 1991; "Your New Smart ID Cards", Nexus magazine, Aug-Sept 1994; "Plastic Future", R. Wainwright, Sydney Morning Herald, February 27, 1995.]