Initially introduced in the 1990s through EMVCo to combat card fraud, secure bank cards with chips were contact only. The contact plated module of the card requires direct contact with a reader terminal, typically dip readers, to communicate. At the same time, pure contactless chip cards were being introduced in other applications, predominantly public transportation for automated fare collection.
The more recent advancements in secure chip technology allow for near field (contactless) payments with both bank cards as well as mobile phones. The secure microcontrollers, called dual-interface chips, combine both the contact and contactless interfaces in a single chip. Thus a bank cards can be used in contactless mode to conveniently ‘tap and pay’ as well as in contact terminals and ATMs to leverage existing infrastructure.
Contactless chip cards contain an antenna to communicate using ISO 14443 Radio Frequency (RF) standards. In mobile payments, the same secure chip is combined with a Near Field Communication (NFC) chip for contactless communication using the same standard. The dual-interface technology as well as increasing levels of chip performance enables new applications for bank cards emerging. These applications include student ID cards for campus accessand payment as well as combinations with metropolitan area parking and public transit. Such cards can even be applied to loyalty activities, such as acting as an event ticket for sporting venues or amusement parks.
Multi-purpose Cards Ring in New Opportunities
As many countries around the world have completed their chip card migration with contact cards, they are now considering ways to leverage the latest in dual-interface technology to support new applications of payment cards. This will capture additional revenue (over cash) and improve consumer preference for bank cards (top-of-wallet effect).
What is critical for a multi-purpose card to be successful in improving the consumer experience is the performance of the chip. Simply stated, all chips are not created equal. Performance is a function of how quickly the chip is able to handle all the data processing for a speedy transactions, typically <300 milliseconds for transport cards and <500 milliseconds for standard payment cards, as well as from how far away it can communicate with the reader (>4cm). Compatibility with POS terminals is also a factor in the speed of a transaction; NXP secures over 90 percent of the POS readers worldwide as well as over 25 percent of banking chip cards so is able to establish benchmarks.
As chip card technology has advance and the performance and security measures have consistently improved, more and more multi-purpose card combinations are possible. With the speed of chips used in bank cards now reaching <300 milliseconds, this allows bank cards to provide convenience and swift movement through transport turnstiles as well as contactless Point-of-Sale (POS) terminals in convenience stores or fast food restaurants as well. An American Express study found contactless transactions to be 63 percent faster than cash and 53 percent faster than using a traditional credit card. (end note reference: “The What, Who and Why of Contactless Payments,” Smart Card Alliance Paper, Nov 2006. The illustration below highlights the fact that bank cards or underlying bank payment infrastructures are being leveraged with government or local ID functions as well as public infrastructure, most commonly public transport. This allows banks to form new types of loyalty programs to acquire new customers as well as capture new, lesser value, regular spend.
In early examples of the Barclays OnePulse in London and T-Money application on multiple bank issued cards in Korea, one can see the bankcard capture spend in regular, smaller value (
Another example, the German Lufthansa Senator Card, combines loyalty and identity functions in a card targeted toward travelers. As this segment of consumers typically spends more, it provides travelers a convenient way of collecting related points for hotels and rental cars. With similar payment terms as credit cards, additional Welcome Bonus Miles, integrated travel insurance, and every euro spent on the card equal to one award mile, it becomes a more widely used card.
Agrowing segment for dual-interface multi-purpose cards is a student card that combines bank debit or e-purse payment and campus access as issued by Santander University programs. The cards provide all the student identification information necessary to access all campus facilities like cafeteria, library, sport venues, etc., thereby replacing an ID card. Off-campus, they can be used as a standard bank debit card because they are linked to a student bank account. This provides an opportunity for a university to reduce card issuance and handling costs, and a bank to provide additional benefits to student account holders. There are more than 3 million Santander University Smart Cards in Brazil, which demonstrates the success of the project, already used by more than 7.9 million users at 302 universities in 12 countries worldwide.
These new partnership models vary from country to country. What is clear is that these types of models provide benefits for all parties while also sharing costs and will continue to increase in the future. No consistent model applies globally, each type of multi-purpose cards has its unique proposition in each region, each country and sometimes even each city.
Additionally, establishing contactless payments in cards lends itself to payment in other types of devices. In China, banks are almost exclusively issuing dual interface cards to support new customer experiences. China Union Pay, the leading payment brand, has issued well over 1 billion cards by the end of 2014 and has well over 30 percent point-of-sale terminals supporting contactless transactions across the country.
The contactless payment feature of the China UnionPay cards is QuickPass and works like a stored-value card. It is most commonly used for everyday transactions like at grocery stores to reduce queuing and increase speed of transactions. This is leading the way to new payment form factors for contactless payments, like new the newly introduced payment function in health tracking bands from ICBC. This is a way for banks to become the preferred payment method of customers as it more seamless integrated into their lifestyle.
Multi-purpose cards bring new opportunities for banks and others to create enhanced experiences for customers. Unleashing the technology will create new partnership and loyalty models for banks to grow their customer base as well as take advantage of the global trend towards cards usage over cash. Performance metrics on the chip, such as those demonstrated by NXP’s SmartMXfamily of products, support such changes to the card holder model.