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Page last updated
February 16, 2003




How much is a loyal smartcard holder worth ?


Smart PKI is on the way
The upcoming smart challenges for financial institutions Smart card-enabled PKI for trusted B2B e-commerce is on track, with the Identrus consortium(1) leading the way. The role of smart cards, in bringing the trust to B2C commerce is also now field-proven with a major successful program in the US, the American Express Blue card. PKI-based too ! With digital signatures, smart cards have found indeed an undisputed role in Internet transactions, beyond the more traditional Debit/Credit applications. All transactions that used to require paper forms and have hand-written signatures can now be turned into e-services thanks to these signature cards. The potential is endless and most financial institutions are gearing up to be key players. So even if this technology is still in its early days, we can consider this is well-known market evolution. But there is a business enabler which is may be less perceptible, but could become the #1 differenciator in the Customer Relationship between a Banks and their account holders.

The card top of the wallet
When asked about their main strategic objectives, Banks are putting Customer Retention ( 93% ) and Wallet Share Increase ( 92% ) at the very top of their priorities. There is no surprise in seeing Financial Institutions wanting to increase their customers' loyalty.

What is the real impact of smart cards on the CRM ? Another poll gives the answer :

It shows that churn rate(2) reaches 17% when customers hold 2 banking products, versus a mere 7% for those who hold 6.

It is then self-evident that customer loyalty directly depends on the ability of the bank to deliver more services to cardholders. What's required to achieve this, is to deliver the right services to the cardholder to ensure your card is on the top of wallet, the one they will never leave at home without. To achieve this you need a flexible infrastructure that allows you to :

Build new partnerships, without technical constraints, with loyalty operators, airline companies, retailers, sport clubs, ...

Effectively deliver new services onto your card instantly, on-line. This is essential as consumers are getting used to Internet time, that is instant delivery, and won't wait for a week, or even a day.

Enable each cardholder to tailor what's resident on their own card ( self provisioning )


Exploit your card base to better know your customers :
Who has what services, usage, frequency, who's rather using the web versus their mobile phone, Turning these business goals into systems leads to the conclusion that 2 technologies are key : Open OS Cards and CMS. The first ones, typically Javacard, Multos or WfSC ( Windows for Smart Card ), offer an industry-standardised way to dynamically update over any network the services ( also called applets ) hosted by the card. For example, to a card issued with a Debit/Credit function, you can either add a loyalty program, an e-purse, or both, while the card is in the holder's hands, without compromising the security of your financial product.

Financial industry standards such as VOP and Multos define the security rules to let you concentrate on the marketing services you want to offer in total confidence.

The nice thing about these cards is that they match the need of a given individual as it can evolve over time :

You do not have to work out the customer segmentation before issuing the card. You can make it after issuance. This makes for a true scaleable one2one marketing tool.

But to make this happen, you need the back-end part that will control and actually perform these operations :

The CMS ( Card Management System ).
The critical role of the CMS in fulfilling the dynamic multi-services card promises, is becoming more evident as you look at the players :

Card issuer who needs to control the card, set rules, and get information on card usage.

Personalisation ( service bureau ) that loads the first set of keys to "administer" the card and uploads also the first services ( applets ).

Service providers who need to first get card issuer authorisation and then a channel to download their service into the card.

Certificate Authorities to deliver user or applet certificates
Cardholders themselves who will place a request for instant service delivery either thr- ough a website or, more conventionally by phone to customer care agent.

Understanding this challenge, Gemplus, the world leader smart card solution provider, has developed a global offering for financial institutions. The solution spans from the card to the CMS, and includes consulting and system integration capability. Want to figure out the ROI of such a system for your organisation ? Do you remember the market cap of dotcom companies based on the number of highly volatile Internet users they have registered? I'm talking about the type of Internet users who just use a portal because they do not know how to change their homepage in their browser ( a 2-click operation ... ). They are valued at approx. $10,000 for 1 user ! Now imagine the real value of a loyal smartcard holder, who has a card that they can easily tailor to their life style, a card that evolves as they change airlines, sport clubs, loyalty programs, ... The card content would change often, so that the card remains the same, YOURS.

(1): see www.identrus.com

(2):churn rate : yearly percentage of customers that resign to take a similar product from competition.

Christophe Chancel
Product-Marketing Director, Gemplus





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