Smart card technology can only improve the way of life for every consumer and not "lure them into overspending" as reported in a Gauteng daily newspaper last week.
"The potential for overspending on smart cards is in fact not a problem at all," says Pierre Kotze, Product Manager at Integrated Card Technology (ICT), one of the country`s leading suppliers of smart cards and a company that firmly believes in the benefits of smart card technology.
"By harnessing the power of smart card technology, card issuers can increase their control over the use of the card at the point of sale," says Kotze. "Card issuers can extend or restrict offline usage based on merchant location, the maximum offline amount, the number of consecutive offline transactions, and a cumulative offline limit.
"For example, in the case of a smart card based credit application, assume the users cumulative offline limit set by the card issuer is R200-00, and the consecutive offline amounts accumulated is R0-00. At first the cardholder purchases an item for R100-00, and later he/she may purchase another item for R80-00. The card will transact offline in both instances, and the consecutive offline amounts accumulated now totals R180-00. However, should the cardholder now want to purchase a further item for R35-00, the smart card will register that the cumulative offline limit has been exceeded, and will request the point-of-sale device to go online to obtain authorisation from the issuing financial institution.
If authorisation, based on availability of funds is not granted, the cardholder cannot purchase that item - thereby curbing overspending.
However, should the online authorisation be successful, the card will reset the consecutive offline amounts accumulated back to R0-00. This example clearly illustrates the smart cards ability to consider past transactions, rather than only the current transaction in making decisions (unlike with the magnetic stripe card), thus making it an extremely valuable credit risk management tool.
"When a transaction is set online, the issuer may also include an instruction in its authorisation response that is used to update the cumulative offline limit. This essentially gives issuers the ability to manage their cards dynamically after they are issued. The card issuer now has control over usage, and can offer card services to customers previously considered too risky, allowing them to expand their customer base beyond its current limits.
On the subject of privacy and security of information on the smart card, Kotze says: "Smart cards allow the introduction of security attributes for reading and writing data. A memory zone may be secret (the data is used for card internal purposes only), public or sensitive. The latter means that it is accessible only after the presentation of a correct `personal feature` of the user. This is in most cases a Personal Identification Number (PIN). The PIN is protected against trial and error attacks by a `false-presentation-counter` - meaning after a specified number of consecutive false entries the security logic blocks the non-public data against any further access.
Regarding the question of training people in the use of smart cards, Kotze says: "Millions of South Africans are using smart cards everyday without even giving them a second thought - prepaid cellular phone cards are smart cards. These cards are used successfully by people who either do not qualify for traditional credit or debit cards or who do not want to overspend on their cell phone bills.
"Furthermore, the use of public payphone cards in South Africa is widespread - once again these cards are smart cards! This is an indication of a successful implementation that has widespread public acceptance. Yes, some training will need to be implemented as is done by banking institutions with the magnetic stripe card, but there is always a training period with the advancement of new technologies."
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