Chip and PIN
technology is expanding the functionality of payment cards
worldwide, helping payment networks and issuers to expand the range
of features and benefits to consumers. Loyalty programmes and
identification functions are rapidly becoming integral to
chip-enabled cards. Justin Bandy

The increased popularity of EMV-compliant chip and PIN cards in the
global cards and payments industry has the potential to do much
more than simply reduce losses from fraud. The shift from magnetic
stripe technology to chip and PIN systems is equipping
EMV-compliant card systems with password-protected data storage
capabilities. Essentially, cardholders are replacing a glorified
barcode with an interactive microchip that can store, update,
transmit and receive data.

This shift is expanding the possibilities of what cards can be, and
is giving cards the potential for multiple uses that will
revolutionise the product.

One of the largest areas for value-added applications using
EMV-compliant cards is loyalty programmes. Several issuers around
the globe are putting their loyalty programmes on EMV cards rather
than using a conventional loyalty programme whereby points are
collected and processed at a central location.

There are three major reasons for this change. First, by putting
the loyalty programme data on an EMV chip, issuers give their
cardholders immediate access to their loyalty programmes. Points
can be accumulated and redeemed instantaneously and cardholders can
often look at display screens at POS terminals to check their
accumulated rewards balances.

Second, merchants in multi-partner loyalty programmes have the
opportunity to customise their relationship with the cardholder.
Since individual cards carry data storage capabilities, merchants
can create added bonuses that are linked to a loyalty programme,
such as a higher rate of points accumulation for frequent

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Third, since many markets are already migrating to EMV technology,
there may be some cost savings associated with tying a loyalty
programme to the chip’s data storage capabilities, rather than
running a separate loyalty programme on a remote host. 

EMV Deployment

Tracking consumer spending

Chip-based loyalty programmes are appearing around the globe. In
Latin America, perhaps the most successful programme is run by BBVA
Bancomer in Mexico. Launched in April 2005, the programme, called
Vida Bancomer, has 500,000 credit cards in force and 10,000 linked
merchant POS terminals. Certain data that tracks consumer spending
is available to merchants as part of the programme, and merchants
can therefore know how frequently a customer shops at their store
and how much they spend. Merchants in the Vida Bancomer scheme have
the option to give cardholders customised rewards based on their
spending patterns with them. POS terminals linked to the programme
have a separate card accepting device that will instantly tell
customers the points status of their loyalty accounts.

In Europe, one of the most successful EMV-based loyalty programmes
is run by Garanti Bank in Turkey. Working with Gemalto, a European
smart card manufacturer, Garanti has expanded its popular BonusCard
programme to include MasterCard’s PayPass contactless
functionality. Garanti’s BonusCard was the first multi-branded
credit card based on an EMV-compliant system in Turkey, and has a
loyalty programme with over 1,000 partner merchants and 100,000 POS
terminals linked to it. Garanti claims that its BonusCard programme
is Europe’s largest multi-branded loyalty and credit card

EMV technology is also being adopted by issuers in the Middle East.
In January 2007, Doha Bank, a Qatar-based private commercial bank,
introduced an EMV-compliant credit card with a built-in loyalty
programme. The card, called the Dream card, is advertised as
providing the extra security of a chip and PIN system as well as
the convenience of an automatically updating loyalty programme.
Dream cardholders accrue loyalty points each time a transaction is
made, including ATM transactions. Rewards can be claimed instantly
using the card.

Though chip technology provides an excellent alternative for
loyalty data storage and processing, several other applications for
EMV-compliant payment cards are cropping up around the globe. These
cards typically combine the capabilities of a payment card with a
non-banking function. Usually, these ‘hybrid’ cards combine some
sort of government-issued card for identification or benefits
purposes that uses EMV technology with a payment card

One of the most innovative programmes in the world right now is the
Tú Salud programme being run in Mexico. Tú Salud, which means ‘your
health’ in Spanish and also is an acronym for the programme’s
lengthy Spanish name, is an integral part of the government’s
health insurance programme. Mexicans are being issued EMV-compliant
smart cards that contain their prescription records. The government
estimates that by 2010, 56 million cards will be in circulation,
and since June 2006, roughly 4 million cards have already been

When a Tú Salud cardholder visits the doctor, the doctor can put
the customer’s prescription on the smart card. The patient can then
take the card to the pharmacy and the pharmacist can use the
EMV-compliant POS terminal to access the customer’s medical
prescription data, provided the customer supplies the PIN that
protects the confidentiality of the data. Over 20,000 pharmacies
have smart card accepting terminals, which were installed as part
of a major push by the cards industry in Mexico to expand POS
terminals in the country.

Another growth area for hybrid cards is the mobile phone industry.
Several markets have seen trials of EMV-based mobile payments
programmes that use contactless technology. A recent example of
this phenomenon was in Malaysia, where Visa teamed up with Maybank,
Maxis Communications, Nokia and VivOtech to launch an EMV-compliant
mobile payment scheme.

Though EMV technology is starting to find numerous applications
outside the traditional activities of the payments industry, there
is still much room for growth. Across the globe, smart cards are
used for a variety of functions, including accessing transportation
networks, as security cards to access buildings and as drivers’

EMV deployment

Government initiatives

A major area for growth for smartcards has been in personal
identification cards, usually issued by governments. In many cases,
it is developing nations that have taken the lead in this
application of smart card technology. One of the most ambitious
schemes has been launched by the government of South Africa, which
has embarked on a national identification programme that will
result in the roll-out of about 30 million smart cards over the
next five years.

Another smart card identification programme is run by the province
of Mendoza in Argentina. Launched in 1995, the Argentine programme
issues smart card driving licences. The cards store up-to-date
records on unpaid driving fines and the cardholder’s driving
history. The cards also store certain personal information about
the cardholder including their licence number and a photograph. In
addition, emergency medical information, such as blood type and
allergies, can be kept on the card if the cardholder so

The government of Gujarat in India also has a smart card driving
licence system, which was launched in 1999.

Other examples of smart cards include government or corporate
identification cards. For high security clearance authentication
procedures, smart card technology is increasingly being combined
with other forms of security technology such as biometric
identification or voice recognition. The US Department of Defense
is one such agency that combines a smart card with other
near-simultaneous identification techniques.

However, despite the widespread use of these cards, none of these
programmes offers their cardholders a mainstream payment

Overall, the integration of EMV technology with an ever-expanding
array of smart cards and payment cards is proving to be lucrative
for the issuers that have adopted the technology. As the cost of
chip technology comes down, the ability to enhance and expand data
storage functionality increases, leading to a wider range of
features which will be attractive to consumers.