German smart card company expands in Canada

A German smart card company Tuesday said it has expanded its operations in Canada to take advantage of a nationwide shift in the way financial institutions deal with bank cards.

Giesecke & Devrient will open a new R&D facility in Markham, Ont., this week, which will act as its main research site for all of North America. The first item on the agenda, said Kim Madore, vice-president of emerging technology, is to develop smart card technology that will help banks, credit card companies and card-issuing institutions make the most of EMV. The swipe card standard, put together by Europay, MasterCard and Visa (EMV), is set to roll out in Canada in the coming years. Mexico will also support the standard with the U.S. as yet undecided. It’s already commonplace in Europe.

EMV is designed to achieve a greater level of interoperability and security using a chip design for cards rather than the conventional magnetic stripe. The tighter security, enabled by a series of encryption algorithms, should make financial transactions safer. Reports suggest that the incidence of fraud when “smart cards” are used is lower than with mag-stripe cards.

To take advantage of the technology, “we have a competency centre that we’re establishing . . . for Mexico, the U.S. and Canada,” said Madore. “This will allow us to be able provide top-level service.”

EMV will be made possible through the co-operation of Interac, the Canadian organization responsible for the nation’s direct payment and debit system. Kirkland Morris, executive vice-president of strategic policy and programs, said that Interac is helping to move the banking industry towards smart chips and approved the technology in February 2005. “I would go do far as to say we’re wholehearted committed to chip migration,” said Morris.

Interac plans to have the necessary infrastructure in place by the end of 2006. “(We’re) just tidying that up . . . then members will be able to move ahead,” said Morris.

EMV is poised for rollout in Canada, but there is no hard and fast schedule to get every FI using the system, said André Chapleau, a spokesperson for the Desjardins Group. “We’re working with the industry. Every financial institution has its plan. We’re meeting regularly with our counterparts,” he said.

“It’s very much up to individual (institutions) to go ahead with their own requirements,” added Morris.

Back in March 2005, Desjardins claimed to be the first Canadian institution to develop a plan for debit cards with smart chips. The institution’s 3,000-plus ATMs and 40,000 point-of-sale terminals are being upgraded to interoperate with the smart cards with an initial target date of 2008.

G&D will also use its facility to develop other applications for smart cards, such as e-passports (which is a growing concern in the U.S.), driver’s licences and cell phone, and mass transit cards.

Other projects in the works are smart chips with a small amount of memory that could store applications. “We’re going to have a computer chip, which is in essence the same as having a small computer on your payment card,” said Madore. “That will allow the users to put value-added applications on the card for consumers. (We’ll) be developing applications that card reside on those cards.”

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