Infrastructure is biggest barrier to smart cards in U.S.

MOUNTAIN VIEW, Calif.- Will smart cards ever take off in America? Europe has been using smart cards for some time now in a number of different areas, including health identification, banking and grocery shopping, but the U.S. has been on the slow track when it comes to the high-tech cards. However, that may be changing according to Frost & Sullivan research on the smart card market. According to the research there were 14.4 million smart card units shipped in 1999 in the U.S.. By the end of the forecast period, 2006, the units shipped is projected to rise to 114.7 million. The pay TV segment, which includes digital broadcast satellites (DBS) and PC/TV set-top boxes, such as Web TV, and the mobile segment are currently driving the market. Combined, these two segments were responsible for shipping nearly 93% of all units sold in the U.S. The greatest challenge facing smart cards is a revamping of infrastructure, found the report. Frost & Sullivan projects that it would take nearly $3 billion to convert just the hardware and over $12 billion to change the entire infrastructure in both direct and indirect costs. The rest of the world, including Europe, on the other hand, built their infrastructures from the ground up, based on smart card technology. Smart card adoption may be even slower in the U.S. banking sector. America's payment systems are based largely on magnetic stripe card technology. Until financials have a business case that proves smart cards can be a viable competitive advantage, this industry is reluctant to change, found the report. "U.S. banks haven't been able to nail down return-on-investment with smart cards," Frost & Sullivan analyst Alyxia T. Do said. "But banks have to face the fact that new competitors in the form of telecom operators, insurance companies, and transit authorities are changing the face of the financial competitive environment. Smart cards can be the banks response to increased competition." Frost & Sullivan is an international marketing and consulting firm.