Smart Cards

One of the key differentiators of smart cards versus a magnetic stripe card is that the data on the card can be changed.  A magnetic stripe (mag stripe) on the back of a card contains static data meant to identify the user or card.  Unlike this static data, the information on a smart card can be dynamic and ever-changing to reflect transactions, history, stored balance, or other useful information.Smart cards are much more popular in Europe than in the U.S. In Europe the health insurance and banking industries use smart cards extensively. Every German citizen has a smart card for health insurance.

Smarts cards may have up to 1 Kbytes of RAM, 16 Kbytes of programmable read only memory, 24 Kbytes of read only memory (ROM), with an 8-bit microprocessor running at 5 MHz. The smart card uses a serial interface and receives its power from external sources like a card reader. The processor uses a limited instruction set for applications such as cryptography.

Smart cards can be used with a smart card reader attachment to a personal computer to authenticate a user. Web browsers too, can use smart card technology to supplement Secure Sockets Layer (SSL) for improved security of Internet transactions. The recent American Express Online Wallet shows how online purchases work using a smart card and a PC equipped with a smart card reader. Smart card readers can also be found in mobile phones and vending machines.

Smart cards, unlike magnetic stripe cards, can carry all necessary functions and information on the card. Therefore, they do not require access to remote databases at the time of the transaction.

Today, there are three categories of smart cards, all of which are evolving rapidly into new markets and applications:

Integrated Circuit (IC) Microprocessor Cards

  Microprocessor cards (also generally referred to by the industry as "chip cards" or "IC cards") offer greater memory storage and security of data than a traditional mag stripe card. Smart cards that are chip cards or IC cards also can process data on the card. The current generation of chip cards has an eight-bit processor, 16KB read-only memory, and 512 bytes of random-access memory. This gives them the equivalent processing power of the original IBM-XT computer, albeit with slightly less memory capacity.

Integrated Circuit (IC) Memory Cards

  IC memory cards can hold up to 1-64 KB of data, but have no processor on the card with which to manipulate that data. Thus, they are dependent on the smart card reader (also known as the card-accepting device) for their processing and are suitable for uses where the card performs a fixed operation.

Memory cards represent the bulk of the 600 million smart cards sold last year, primarily for pre-paid, disposable-card applications like pre-paid phone cards. Memory cards are popular high-security alternatives to magnetic stripe cards.  Microprocessor cards (especially those with a cryptographic capability) are gaining in popularity as governments and companies move to mobile Personal Identity Verification (PIV) and the storage of sensitive personal data such as an ePHR.