Forward-thinking enterprises are realizing the great opportunities offered by smart cards—little plastic cards embedded with a computer chip that stores thousands of bits of electronic data and allows for the transfer of data between a user and the corresponding organization. This innovative technology enables these companies to have better access to more reliable data, which can drive them to a competitive advantage.

The automated chip card, or smart card, was invented in Europe in the 1960s, with the first mass use of the cards in 1983.

Currently, use of these cards prevails in Europe, but they are also popular in other parts of the world. In Tokyo, millions of commuters have used Suica cards since 2002 to pay for their subway rides. Many U.S.-based organizations are steadily migrating toward this technology, especially as they learn about the associated benefits: convenience, security and data warehouse compatibility.

Safe, secure and resourceful
A smart card resembles a credit card in size and shape, but inside it is completely different. First, it has an inside—a normal credit card is a simple piece of plastic with a magnetic strip on the back. Second, the smart card is secure, whereas the magnetic strip on a credit card can easily be corrupted.

This is how smart cards work: Data, typically information about a user or a monetary value set by a corresponding organization, is stored and processed in the card's embedded chip or microprocessor. This data can be accessed only through the chip operating system—a sequence of instructions made with a specific code language and permanently embedded in the card's memory. This provides a high level of data security, since a personal identification number (or other form of security) must be used to access information.

Smart cards are also more user-friendly than other data storage and transmission devices because they do not need to be backed up on paper or diskette. Unlike diskettes, they are also very durable, almost completely unaffected by heat, dust and humidity. And since they can contain embedded microprocessors—as opposed to the usual magnetic stripe on a credit card or debit card—they cannot not be "corrupted" by magnetic fields or computer viruses.

Typical markets for the card fall into three broad areas:

	Electronic currency replaces cash or traditional credit cards used for pay phone, transit and toll collection.
	Electronic identification permits controlled access to buildings or systems (like computers or cash registers).
	Data warehousing applications store and retrieve data, such as medical records or process verification information.

Popular science
Smart-card-enhanced systems are used worldwide in several industries, including healthcare, banking, satellite television and transportation.

Its storage capabilities make the smart card a trusted identity tool. For instance, in the healthcare industry patients can carry a single card that holds their personal and medical information, photo identification, insurance information and a medical history snapshot with notes on allergies, medications and recent treatment. Registration staffers can use the cards to check patients into a hospital quickly and accurately, and emergency room personnel can use them for fast, reliable access to relevant patient data.

As a result, the reduced paperwork minimizes errors and makes for fewer administrative headaches. Necessary data can be more quickly turned over to the insurance company, which then reimburses the hospital for services. This streamlined approach offers greater efficiency, increased safety in patient care and greater patient satisfaction.

In Europe, health insurance companies use this plastic device prominently. For example, in 2006 the German government started what it described as the most extensive e-health communication project in the world, replacing health insurance cards with information-packed smart cards. At that time, 72 million customers of German health insurance companies with access to state healthcare were required to use a "health card" with a microchip when they saw a doctor, attended a clinic or bought a drug. Patients were allowed, however, to decide whether certain information was put on the card and used. As a result, healthcare fraud was reduced, claims processing was streamlined and important medical information was delivered in a timely manner.

In Tokyo, commuters use colorful Suica smart cards to pay for subway rides.

Smart cards are used in the banking world as sophisticated debit and credit cards, providing an extra dose of security. And satellite television companies use smart cards to identify subscribers to the satellite network.

Chip full of data and opportunities
These industries and organizations in retail, marketing and transportation are combining the storage and analytical capabilities of data warehousing with the innovative opportunities smart cards provide.

Organizations with data warehousing systems can hold current and historical data retrieved through customer transactions embedded on the card's microchip for analysis in near real time. This capability enables companies to perform deep analysis of detailed customer data to improve business strategies such as using findings for product development and marketing programs.

Besides creating a sustainable competitive advantage, the combined technology can build customer loyalty. Companies can offer customers the opportunity to use a smart card every time they make a purchase. The data warehouse can collect and keep track of the stored information—personal identifiers, purchase history, etc.—to acknowledge frequent customers. It can also award customers points in real time directly based on their spending level and simultaneously record valuable data about their buying preferences. Enabling a points-based reward system can ultimately encourage repeat purchases.

Smart technology
Organizations around the world are taking advantage of the benefits of combining smart card technology with data warehousing. The capability to collect and distribute information in near real time will enable better customer service, more reliable customer tracking and enhanced global opportunities—all from a compact, data-laden, highly efficient card well named for its brilliant technology. T

Lisa Campbell is a freelance marketing and technology writer in New York.

Photography by istockphoto

Teradata Magazine-December 2008