How are Smart Cards Useful in Financial Application

A smart card is a plastic card that has an inbuilt microprocessor. It is typically used for personal identification and carrying out financial transactions – guest post from across the Pond by David Smith

 
The embedded chip holds information about the card user and allows access to a resource after verifying the information. It can also store data.  

In addition to financial transactions, it can also be used in a number of other financial applications to deliver value added services to consumers and businesses. These include corporate card schemes, money on a card, and targeted marketing resulting from studying and analyzing consumer buying behavior.  

Let us look at some of the ways a smart card can be useful in financial applications.  
 

Debit or Credit Card

 
Smart cards can be used as a debit or credit card. Due to the embedded microchip, smart cards provide high security as compared to conventional debit or credit cards. It is not easy for a hacker to access or use a smart card or verify themselves. Moreover, the magnetic strip on the smart card can also not be copied.  
 

Access Control

 
Smart cards can be used for access control by verifying the identity of the cardholder and allowing/disallowing a user to access the financial information associated with their account. Just like you need to keep your cash locked up in a physical space, smart card can allow you to control who can directly access your financial documents.  
 

Prepaid Value Card

 
Prepaid value cards are the perfect way to use for a one-time purchase of an online item or to give to someone as a gift. A smart card is an efficient and safe way to ensure this.  
 

Electronic Purse

 
Debit cards, when used routinely for online purchases, can pose a threat to your finances at the hands of a hacker. Moreover, carrying cash especially when travelling can be risky. A smart card can work as an electronic purse to store a small amount when you need to make a purchase and keep the actual debit card information away from potential hackers.  
 

Electronic Coupons

 
Everyone loves coupons, but paper coupons can become quite a handful. Electronic coupons are easier for customers to handle, and encourages them to use them more often. Eventually, customers end up buying more of them.  
 

Loyalty Programs

 
Smart cards can also be used for loyalty programs. When it comes to business finances, one of the profitable ways is to implement loyalty programs. It helps a business in two ways. Firstly, it can be used for tracking the preferences of consumers to help them in managing their logistics and demand analysis. Secondly, it also helps a business to retain customers, since they keep coming back due to getting rewards and good deals. Thus, it helps both the business and the customer. 
 

Data Storage

 
Smart cards can also be used for storing sensitive information and keeping it secure. When tracking financial information on a piece of paper, losing a document can be a major setback. This is where a smart card can be using for easily and securely storing your documents and having easy access to confidential documents.  
 

Identity Authentication

 
A smart card can be used to authenticate an individual’s identity. Just like your personal identification document is required for many formal procedures, you can use a smart card to validate the identity of an individual by combining it with biometric technology. This is done by storing the biometric template locally on the smart cards and making comparison without the need to connect to a database of biometric identifiers.  
 

Final Thoughts

 
The capability of smart cards to record and modify information in its physically protected nonvolatile memory makes it a powerful tool for many applications in the financial sector. Smart cards are small, portable, and secure; they can interact with automated systems; and can update data instantaneously. 
 
 

David Smith is a Certified Information Systems Security Professional (CISSP) specialized in Network and IoT Security with 12 years of experience in both the public and private sectors.