The smart card technology that originated in the heart of affluent Europe has traditionally found usage for the elite around the world, bringing conveniences such as mobile telephony, loyalty systems across international airlines and hotel chains, Internet and mobile banking. However, India has been trying to re-invent the smart card usage to tackle various socio-economic issues. Today, the country has many unique success stories in terms of usage of the smart cards—down to the grass-root level, from the Jaipur Dairy project and the village-level drinking water management project to the Smart Rupee System (SMARS) project at IIT Mumbai.

"Unlike in developed countries, smart cards hold out immense possibilities of improving the lives of all one billion Indians if only it could achieve cultural internalization by moving away from the center, to the peripheries of the Indian societal manifold," remarks Sanjay Dharwadkar, head, systems marketing, Smart Chip, a Delhi-based company that provides smart card solutions. According to him, the country has taken two specific approaches to initiate this approach. The first is to find appropriate smart card-oriented solutions to augment grass-root development processes (see case study: Social Welfare). The second is to find mass applications that transcend social classifications, like that of a citizen identity card.

The smart card has immense potential of finding effective large-scale use as a citizen ID card. Such an application requires handling of large numbers under conditions prevalent in India such as inadequate communication infrastructure and wide area networking. Dharwadkar says, "The smart card-based driving license is one such successful application and can be considered a live prototype of a full-fledged citizen ID card." Such a smart card could easily be extended for use in election ID, ration card, income tax, pension, land records and a host of other applications, including disbursement of subsidies. Experts estimate that around Rs 1,000 crore can be saved per year by implementing integrated citizen smart cards for the entire nation, which could be done within five years. Citizen smart cards—as an authentication medium at public Internet kiosks—could also be a gateway to the Internet for millions.

E-purse for Indians

While Frost & Sullivan projections show the Indian smart card market swelling to three million by 2005, it is ironic that there are only 3.5 million credit cards in the country. This, experts believe, has been due to the lack of guidelines and standards. The issue, however, has been sorted out to a certain extent by the RBI-sponsored SMARS project at IIT Mumbai. Experts believe that SMARS was a right step towards standardizing smart card-based payment systems. Unfortunately, the recommendations were marred by controversy and the RBI has asked the Bureau of Indian standards (BIS) to review the report of the working group constituted to study the recommendation.

However, experts believe that unlike credit cards, smart cards in the form of e-purse can become all-pervasive if a killer application can be found. According to Sanjeev Sharma, country business manager, service automation division, Ascom India, "The killer application for India is typically the payment of utility bills for electricity, water and gas. Every household in a city is a consumer of electricity. Most of the consumers would be happy to have an e-cash smart card and would welcome someone to come to their house to acquire the bill amount from their smart card onto a smart card terminal." Or at least, they should have the facility in the neighborhood, say, at an STD kiosk, to accept the e-cash smart card and pay their utility bills through the POS terminal at the kiosk. Experts believe that this convenience is bound to extensively popularize the use of e-cash smart cards in the country.

Small-value transactions are another application that can really push smart cards’ growth. With the average credit card transaction in India worth Rs 1,000 to Rs 1,200, the cost of such a transaction on the buyer works out to Rs 15 to Rs 20. Thus, buying items like groceries does not work out to the buyers’ advantage. This is where the smart card comes into effect. Moreover, while obtaining a credit card requires a number of formalities and has certain minimum eligible criterion, store-value smart cards do not have such hassles.

The market for smart cards seems wide and deep. The first potential users will be car owners, because they have to make regular fuel purchases. The second-largest base would be of the public transport commuters where the average purchase size is between Rs 5 to Rs 200. This is the area that BEST and Bharat Petroleum (BPCL) are targeting. While BPCL has already netted 500,000 customers for its petro card, BEST has sold 13,000 cards on select routes. Likewise, banks and financial institutions—Bank of Baroda and IDBI—have been considering the use of the smart card as the "money of the future". So, the transformation of the monetary system in the country is inevitable.

Smart cards can also help reduce the amount of loose cash lying with the public. This money can then be utilized effectively by the banks. Also, electronic money allows one to transact without taking money out of the banking system. Banks benefit because, by the time one actually spends money, one can create credit by lending the money. Transactions are simpler. At the end of the day the seller connects to the bank through a modem and withdraws money from the various accounts into his account. This way the consumer keeps his money safe and the vendors have low infrastructure costs.

An extrapolation done by Orga, Kartensysteme, GmbH, Germany, shows that by 2015 India would have a base of about a billion card users. No wonder, smart card players in the country are optimistic about India’s potential. Experts believe that by 2005, the country will be amongst the two biggest markets for smart cards in the world.

SHUBHENDU PARTH
in New Delhi