Moves to implement smartcard schemes are being driven by marketing, rather than technical feasibility – and are making life impossible for terminal suppliers and merchants, says one CEO.
Criticism of proposed stored-value card schemes from Clive Cooper-Smith of Advantage Group has been echoed by an Australian counterpart – and comes as the smartcard environment continues to splinter.
In the past month, battle lines have been drawn between Visa and the Mastercard-owned Mondex, with Visa committing to Sun’s JavaCard API and Mondex trying to rally support for Multos, the smartcard OS it announced about six weeks ago.
Although Mondex has said it will integrate JavaCard, the two systems seem likely to remain separate and competing for a long time yet. Banks which offer both Mastercard and Visa products now face choosing between the two or installing separate back-end systems.
Such choices are becoming familiar to terminal suppliers, says Cooper-Smith, whose company supplies Hypercom brand equipment. He points out that all the suppliers who certified their equipment to the Hitachi 3109 chip in the belief that it would be used in the production version of Mondex now face re-certifying to a new Multos-capable chip when it becomes available next year.
Even the West Australian terminal supplierIntellect, which has leveraged its expertise in customisation to make significant sales in Europe and New Zealand (where it recently won a major contract to supply smart-card capable POS terminals to Progressive Enterprises) wants interoperability and common standards, says spokesman Geoff Gander.
“Re-certifying is costly. To do all the work at the back end, to write the application and go through certification runs into six figures.
“It’s a lot of work at the terminal supplier end to try and comply with a lot of the software out there, whether it be Mondex Visa or anyone else. And if you want to stay in the market right now you’ve got to do a heap of development or decide to put all your eggs in one basket.
“We’ve been fortunate that most of the (stored value and smartcard) rollouts at the moment are in Europe, where we’re a particularly strong supplier. That return makes it a bit easier for us to go forward, but some of the other vendors have had very few sales and I’d be absolutely in agreement with their frustration, because it’s a difficult business case to justify at the moment.”
Gander expects to endure “a lot of huff and puff” over industry standards in short term “because Mastercard and Visa are battling to get position. You have to take your hat off to Mondex for their marketing at the executive level in banks. They’ve got into a lot of people’s mindsets by spending a lot of money on the brand name thing over the last five years.
“But the fact of the matter is there’s still a long way to go with that. The schemes which will be up and running in the short term are the European national schemes, or even the Proton system, which seems more stable than the other two.”
Cooper-Smith says he doesn’t want to appear negative about the prospects for smartcard applications, “but the people making the decisions about how to introduce it are essentially marketers, not technologists. We need to see a little bit more participation.
“Some of the schemes add up to about another 12% on the value of the terminal, by the time you’ve got it all capable. I can tell you now it’s the merchant who’s going to have to front that bill eventually - the guy who owns the terminal. The manufacturers aren’t going to wear it. Nobody out there is seeing an increase in terminal demand as the result of smartcard technology.
“Everybody’s basically having to pay a lot of money - for the specs and for the royalties collected by the likes of Mondex. Mondex is making money on the royalties but it’s costing us.”
“From the time we started talking about it to now, all of a sudden Multos has turned up - and that wasn’t even talked about 18 months ago. I think developers see Multos the start of an example - where they’re starting to back away from something they said originally.”