Extending EMV chip beyond banking and payments

The global EMV chip infrastructure represents an immensely valuable resource for banks which, with a little imagination, they could use to grow profitable new businesses outside the payments industry.

Excluding SIM cards, more than 1 billion smartcards are shipped each year, but of these, less than half are standard EMV chip payment cards. The rest are proprietary smartcards used in sectors such as government, healthcare, education and transport for a variety of purposes, which may or may not involve payment, but usually support secure identification and authentication. I’m convinced that the majority of these could be replaced by multi-application, multi-partner, branded EMV chip payment cards issued by banks. Compared with the “closed loop” proprietary schemes which they replace, the resulting partnerships are more open and interoperable, due to the EMV standard, much more cost-effective, due to economies of scale, and, in most cases, more secure, since security is the whole point of EMV chip.

An excellent example of this principle is provided by Banco Santander, which has quietly issued an astonishing 5 million student cards at 220 universities in over 10 countries. These EMV cards support all the functions you would expect in a smart campus card – student ID, physical and logical access control, digital signatures, library management, attendance monitoring, discounts at local shops, and so on – plus, optionally, standard, branded debit card payment. Everyone wins. Students get a highly functional card which, in addition, can be used for payment at 20 million outlets worldwide. The university benefits from not having to run its own proprietary scheme, and from much lower costs – the bank typically pays for some or all of the scheme. And Banco Santander gains access to a highly profitable customer base – some 70% of cardholders go on to become long term bank customers.

EMV technology can also be used to set up brand new smartcard schemes. In Russia, 70% of the population enjoy some sort of social entitlement, such as free transport, subsidised medical or utility payments, and so on, by virtue of their age or status. Administering these schemes, which tend to be paper based and highly labour intensive, is expensive, unreliable, and prone to errors and fraud. Recently, a number of banks have partnered with regional government and service suppliers to launch EMV-based social card schemes. Citizens are issued with branded payment cards, which may if necessary be very low-risk, pre-paid or 100% online authorised debit products, and which also support the appropriate social benefit applications. At the point of sale, the cardholder’s social entitlement is authenticated, the discount or other benefit calculated, and the net payment processed in the normal manner, all in one secure, streamlined transaction.

Developing these sorts of schemes is not easy. There are substantial technical, commercial and above all political challenges involved when banks attempt to work together with third parties from very different sectors and cultures. But the rewards can be huge, and I think we can expect more of this sort of thing in the future.

Nick Collin, Banking Automation Bulletin, August 2011