This chapter covers the key features of a smart card, its manufacturing process and the components of a smart-card system. It can be skipped by those who are already familiar with the technology and whose main interest is in advanced card types, and in particular in combining applications within a single card.

Appendix B also lists some further reading on smart-card technology in general.

What is a smart card?

Common features

A smart card is a card incorporating one or more integrated circuits within its thickness (see Figure 3.1). Smart cards are also often called chip cards or integrated circuit (IC) cards – these terms are interchangeable.

As we will see, the terms cover many cards that are not really ‘smart’ in the sense of being programmable, but the smartness comes from the way they are used as a part of a system.

Most smart cards meet the ISO 7810 standard (bank card size and thickness), but there are other standard card shapes, such as the ID-000 shape used by mobile telephone SIM cards. And some devices known as smart cards are not card-shaped at all – although this does raise a number of issues, as we will see in Chapter 6.

There are two main categories of smart cards, usually characterised as memory and microprocessor (or microcontroller) cards. The name microcontroller is technically more accurate since the chip includes memory, the serial interface and, possibly, more than one processor.

Smart cards are a thriving industry!

How do we know this to be the case? Well, if we look at the landscape of a typical industry sector, we see in smart cards the same characteristics we would witness in any other established and mature market.

For instance, companies have been created and thrive financially, based solely on the technology itself. These companies compete fiercely for a market share and brand leadership. Aggressive actions, such as mergers and acquisitions, and rigorous oversight of intellectual property rights are commonplace in the quest to increase both the industry and shareholder value. Dedicated industry analysts have built careers by following market movements and advances in the technology, and by prognosticating its future potential.

Trade shows and events have been established in every region of the world, dedicated to the exhibition of the technology and the sharing of information and industry best practices. These highly specialised gatherings not only showcase the latest in smart-card technology, but carefully articulate its relevance to critical sectors such as government, financial, retail, transit, healthcare and mobile telecommunications.

Industry associations have emerged to develop standards for smart cards and the applications that depend on the technology. In addition to developing standards, these birds-of-a-feather organisations have become valuable forums for information exchange between technology providers and end-user communities.

Magazines, periodicals, newsletters and websites cater exclusively to the smart-card industry. At the time of writing, a Google search on ‘smart cards’ resulted in 92 500 000 possible sites to explore.

The basic structure of a reader for contact cards was described in Chapter 3. This chapter considers the specific requirements of different sectors and of multi-application cards.

Reader type

In Chapter 3 we saw that readers may be manual or motorised, partial or full insertion, chip only or hybrid.

Motorised readers have specific advantages in multi-application environments too: the terminal can execute both ‘warm’ and ‘cold’ resets (see Chapter 8), allowing it to switch between applications without giving potentially confusing messages to the user or card-holder.

Many smart cards carry a magnetic stripe as well. This can be read when the card is inserted or when it is withdrawn; the former has advantages if some form of fallback is required, but reading a magnetic stripe on entry is often less smooth than reading on exit, and so gives slightly lower success rates. In retail environments where reliable reading of both chip and magnetic stripe cards is very important, special readers have been developed (see Figure 7.1) that combine a long reading slot for swiping with a ‘park’ position for reading the chip.

Contact readers must also have limit switches or other methods for detecting when a card is in place; these are used not only for powering up the card but also for detecting when a card has been inserted wrongly or not removed at the end of the transaction; in these cases it is often desirable for the terminal to emit a warning tone or signal.

Technology

It will be clear from the rest of this book that the availability of technology is no longer a limiting factor preventing the deployment of multi-application smart-card schemes. However, further technology developments will continue to appear and some of these will be distinctly helpful by allowing a wider range of applications, or by making existing applications work better or at lower cost.

Microcontrollers

At the chip level, semiconductor technology as a whole continues to advance in line with Moore's Law: doubling the number of gates per chip every eighteen months. In the case of microcontroller chips, the 0.12–0.15 μm technologies that are regarded as leading-edge in 2006 are believed to be close to the limit for E2PROM; however, flash memory is being used to grow total memory sizes into the megabyte range, and this technology will be used increasingly in combination with E2PROM to provide the memory sizes required by the telecommunications industry today, and probably for multi-application cards in the near future.

In 2000, I forecast that smart-card microcontrollers would be using 0.1 μm processes by 2005; this turns out to have been optimistic, but this level is now regularly used for DRAM products and should be achievable by 2007 for microcontrollers, moving to 0.07 μm or less by 2010.

Memory sizes for microprocessor cards, currently mostly in the range 4–128 kB, are likely to rise over the next few years to 32 kB–8 MB, with a wider range of combinations of memory types, perhaps configurable at a relatively late stage in the manufacturing process.

Of the many skills needed to operate a bus company, airline or train service, ticketing and card issuance would not normally rank highly on the list. But transport operators are increasingly turning to cards to protect their revenue and to make passengers' journeys smoother.

Existing public-transport card schemes

Most existing public-transport schemes in cities, towns and rural areas are based on trains and buses for long-distance travel, combined with buses and trams for local journeys. These are often linked together under the auspices of a local transport authority or consortium, and may offer some form of common ticketing system and fare structure.

Revenue management

The business case for existing public-transport operators to convert their ticketing schemes to smart cards is often very strong, and is based on improving revenue management and reducing operating costs.

Each operator, particularly in a group or consortium, wants to ensure that it receives the revenue to which it is entitled and this demands a shared pool of information about passenger journeys as well as costs. With older forms of ticketing (paper or magnetic stripe tickets) this could only be achieved with great difficulty, if at all; the cost of collecting the data was very high. It was also difficult to check the cash collected by on-board staff. With a smart-card ticket, the card forms part of the data collection system and a full record of all transactions can be collected. This enables revenue to be shared more accurately, and thus encourages common ticketing schemes.

For many of the card schemes discussed so far, the card has as much marketing as operational value for its issuer; it ties the consumer to the issuer and provides a channel for delivering services and differentiation. This chapter is concerned with a group of applications where the card-holder is already a member of a defined group, and the aim of the card is often to raise barriers around the group and prevent infiltration or abuse of the privileges of the group.

These include not only employee card schemes, schools and universities, but also holiday camps and clubs, prisons and detention centres. Athough they are often referred to as campus cards, the scope may be much wider than a physical campus or group of sites.

Sometimes principles that apply to public schemes must be completely rewritten for this environment: for example, employees may accept the storage of personal data or a biometric on the card as a condition of employment. Laws governing payments in legal tender may not apply to canteens or on-site vending machines.

For this reason it is often difficult to mix campus cards with open applications: for example, several banks have found it difficult to act as a card issuer for an electronic purse on a university card, since they are subject to regulation that imposes high standards and costs, and that makes it difficult to meet the rapid turnaround required to address lost cards in a university environment.

Cards are now the payment instrument that banks prefer customers to use for spontaneous transactions. They are gradually replacing (in some countries, have replaced) cheques and other paper instruments for these transaction types, and even have a rôle to play in many regular or business transactions.

Using a card removes a manual process (capturing the transaction details) and with it the scope for errors that any manual process offers. Cards help customers to use lower-cost channels (such as ATMs and the internet) and, in the case of smart cards, also actively help in managing many risks: by forcing the user to authenticate him- or herself, by managing transaction ‘velocities’ – i.e., the rate of spending – and by offering the merchant or acceptor the opportunity to verify the identity of the bank or its membership of a valid card scheme. In some cases the card acts as the agent of the bank, authorising or cryptographically signing transactions on the bank's behalf.

There is also a marketing and psychological side to the bank–card-holder relationship: the card carries the bank's brand and is the permanent reminder in the customer's pocket. In a competitive business, where customers may have accounts with many banks, the card that is ‘front of wallet’, i.e., used most often, identifies the bank that has raised the level of its relationship from pure account-holding to that of a preferring customer.

Smart cards in daily life

Cards are so much part of our daily lives that we do not even think about their functions, the technology behind them or the things that make them special.

Cards are behind some of the biggest changes in behaviour in the Western world since 1970 – the way we enter buildings, pay for goods in shops, speak to our friends and business partners. Back in 1970 it would have been difficult to imagine the ease with which we now draw money from ATMs in foreign countries, or that many ten-year-olds would have their own telephones.

Many of these changes have helped to spread technology as well, benefiting a wide range of people in poorer countries and remote areas. Where there is no reliable telecommunications network, the ability to store a patient's health records in a card can save lives. In most African and many Asian countries, there are many more mobile telephones than fixed lines; these telephones not only use cards to provide security and added functions, but may themselves act as terminals for other card-based applications, such as microfinance.

It's not all good news, of course: some of these changes have been made necessary by the increasing need for security, while others have increased efficiency but have incurred a cost in reduced personal service and social interaction. And not all card projects have been equally successful.

We must now digress from our discussion of the technology of cards and readers to cover another two sets of technologies that have a major impact on cards, and are likely to grow in importance in the coming years: biometrics and cryptography. This chapter will cover biometrics and Chapter 5 will address cryptography and the security of cards.

In most smart-card applications, the card is associated with a person; it represents a key to that person's details in a database. It is, therefore, very important to be able to identify the person who is using the card and to ensure that he or she is the person whose details are being unlocked. Often (for example in an access control or passport application), this is the main purpose of the card or application. In other cases the purpose is to allow access to data stored about that person.

In most card-based systems we need to do this automatically, although sometimes there is a human element as well (for example, inserting the card could call up an image of the card-holder, which can be checked while the user is entering his or her password or verifying a fingerprint).

Many people feel that a human check is better than any automatic check, however this is definitely not true when the population being checked is large.

Another science – some would say art – that is very important to smart cards is cryptography. Cryptography is an essential part of many of the security functions for which smart cards are used. This chapter can only give an overview of the issues that are relevant to smart cards, and readers seeking a deeper understanding of algorithms and cryptography generally are referred to the further reading suggested in Appendix B.

Cryptography

Algorithms

Modern cryptography combines algorithms (mathematical transformations) and key management techniques to secure data in many different ways. The main algorithms used change only very slowly, since only thoroughly tested and well understood algorithms are used for important security functions. People outside the security industry often feel that a newly developed or secret algorithm should be more secure, but the history of cryptography has shown that only a very few algorithms remain unbroken after many years. Nearly all others succumb sooner or later to some easy attacks – once an attack is known the algorithm is useless.

Algorithms are divided into two groups: symmetric algorithms (like the Data Encryption Standard ANSI X3.92 or its more modern and stronger replacement, the Advanced Encryption Standard FIPS-197 1) use the same key for encryption and decryption. Public-key algorithms (such as RSA 2) use a different key for encryption and decryption: the owner keeps one key private while the other is published.

The term ‘multi-application card’ is used in different ways by different groups of people: the marketing department sees the card in terms of selling features, the IT department according to the technologies used by the card, and the operations department looks at the number of processes the card supports.

This chapter explores the definitions of the term and sets the framework within which the remainder of the book will use it.

Single-function cards

Most smart cards have a single function. There is a simple reason for this: the card issuer has issued the card to solve a specific problem or to provide a specific service. The relationship between the card issuer and the card-holder is generally not complex, while most card issuers are in one well-defined business. So there is no reason for the card issuer to provide multiple functions on the card, which in most cases would add to the cost.

Smart cards are, in many cases, replacing a magnetic stripe or visual identification card, which generally had only one function. So, for example, the earliest smart cards were used mainly for public telephones: they held value that could be loaded by the telephone company and decremented by the user making calls, and this was their only function. Many schools issue cards to their pupils for recording attendance at classes, while companies issue cards to their employees for access to buildings. These cards need no further functions.

Having looked at the technology available to create a multi-application card scheme, we now turn to the business requirements – what are organisations trying to achieve when they launch a multi-application scheme? What are their underlying aims and how do these differ from sector to sector? If several parties are co-operating on a scheme and they each have different aims, this may cause problems from the start.

In this chapter, I will consider the requirements that are common to all multi-application schemes, and in the next five chapters I will look at some key sectors that have implemented smart-card schemes. In each case, there is scope for combining applications within one sector or across sectors: combinations within a sector may be difficult for reasons of competition or service scope, whereas across sectors the issues may be cultural or organisational. I will explore these in more detail in the last few chapters of the book.

Card issuing

Issuers generally have one of two motives for issuing a card: the first is to provide a simple record of entitlement (proof that some money has been paid or that a person may enter an office). This type of card is often short lived and it is probably a simple data carrier, adding little value. Typically, the requirement for such a card is to provide the record of entitlement at the lowest possible cost consistent with an adequate level of security and reliability. Such cards are very unlikely to carry multiple applications.

We saw in the previous chapter that the application selection function plays a pivotal rôle in the design of any card-reading terminal. In this chapter, I will review the requirements for application selection and the options for cards and terminals to implement this function.

Scope and functions

Application selection is required for any microprocessor card, not only for multi-application cards, since it is the process by which the card application is started up.

For memory and wired-logic cards, even though there is no firmware ‘application’ on the card, the initial process is similar but application selection is implicit. In this case the terminal must select the appropriate supporting program and functions.

Where either the card or the terminal is multi-application, in the widest sense described in Chapter 2, application selection plays a pivotal rôle in determining which of the applications will be run; it links the technical protocol-handling functions with the logical transaction flow.

In some cases, the application to be selected is known before the card is inserted, either from the context of the transaction, or because an operator or user has already selected a function. In other cases the card and terminal must agree the selection, or offer a choice to the operator.

Card initialisation

Power up and reset

The process starts with powering up of the card and the way the card responds to the reset signal: its answer-to-reset (ATR).