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Interview: Jacques Seneca, Eurosmart Chairman

Thursday 11 October 2007

Smart Insights: Will customer concentration, for instance telecom operators, banks, supranational entities such as Visa or MasterCard, impact the smart card industry?

Jacques Seneca: I think that, on the telecom side, a lot is already done, in the sense that we already have very large customers. Maybe, in the banking world, things are going to evolve with banks going more and more international and trying to have a global coverage. They would probably try to talk more to large providers, meaning the providers that can setup global agreements, by large regions or even worldwide. So that would probably have an impact.

SI: In Eurosmart 2020 vision, do you foresee more concentration coming in the smart card industry?

JS: I think this industry has not matured yet, so certainly there will be some further concentration. To a large extent this is to be horizontal concentration rather than vertical concentration. We see mergers of smaller players; there are lots of rumors on the market as of who could merge with whom, and who could acquire whom. So certainly, this market has not completely finalized its restructuration. In a good sense, this means having stronger players coming into the market and putting energy together to be able to develop more business, more solutions. The need for R&D for example is probably a parameter that will push several players to work together, to offer more global solutions. Players that are taking care of only one part of the value chain will come together with others to be able to offer more complete solutions.

SI: Do you foresee the smart card industry merging into a more global IT industry? Will a more global IT industry require the same skills as the current smart card industry?

JS: I think the smart card industry is covering, on one side, a service activity, which is to issue large volumes of cards, each of them being personalized individually, so that's a part of the industry not directly related to any large IT player. From the service provider point of view doing personalization, or remote management of the cards, this is an industry as such, which will not necessarily, in my view, integrate into large IT players.

Now, from a technology point of view, when we talk about the operating system, the applications on board of a card, I do think that we need to move from a community of developers which is at best a few thousands experts in the world developing applications into probably millions of application developers because of the capabilities of the operating system that are provided whether they are Java-based or .net-based. These are more open standard with more powerful and user-friendly tools. So, in that sense, the smart card industry will get more integrated and it will be more easy for IT players to play a role in there.

SI: Do you believe innovation will come from today's major industrialists or will it come from start-ups?

JS: I think, by history, we have to admit that start-ups being more flexible, they are probably in a good position to bring innovation. The large players are probably a little bit risk-adverse. So of course, they have more power, more resources including financial resources, and therefore, they continue to innovate massively. But every player should keep an eye on what's coming out of start-ups because, precisely, they have no legacy, so sometimes they can start from scratch. I mean that's not only for the smart card industry, it's true for many industries.

SI: Many major smart card companies of today did not even exist in 1994, from which technology field would you expect 2020 leaders to come from?

JS: I'm quite convinced that the technology will not be replaced as such by this time. The patents are now almost 40 years old, there has been a good level of interest for this technology for the last 30 years. If you look at the big deployment of banking cards, it's probably half of this duration: it took 10 to 15 years to get deployed. So if you look at the speed of adoption of new technologies, on one side, it could look very fast, because 13 years ago, there were only 10 million SIM cards, this year, there will be around 2.5 billion delivered, 250 times more, so the speed of deployment can be considered very fast. But at the same time, to introduce a new technology which could replace an existing one takes a lot of time.  The introduction of the smart card is in itself a demonstration. So, I would not bet any technology would replace as such the smart card.

Probably, some will complement what is going on at the moment, and when I say smart card, I'm not talking about the form factor of the card only, I'm talking about all smart secure devices, which can have other form factors than a card, in the next few years.  For example, the handset could be secured by smart secure devices that can take a lot of the activities, which are done by the card. It doesn't mean they are going to replace the card.  For insyance, when you will pay with your mobile, it does not mean you will not have a banking card any more. You will probably just have both, and each of us will use each item under different circumstances. Some will prefer to use one in a case, and another one in another case. This is not a technology that can disappear in a matter or 10 to 15 years.

SI: Form an investor standpoint, what would be the most interesting smart card related technologies to invest on for the future?

JS: I think that the contactless is definitely something which is going to boom in the coming years. Just consider the volumes of microprocessor based contactless cards we are putting on the market right now are still very small. Passports is a big application, subscribers transport cards, payment cards, … but these are still relatively marginal compared to 4 billion cards delivered every year. So this is going to be a technology for the future.

Regarding the chip based technology, of course, the security features including the form factor are also worth investigation and investment. For example, in the ID field, there are all kind of physical security features on the form factor whether it is a card or a passport booklet, but also when you look at the use of dongles, there are many form factor for these dongles, many different features and so on. Around the chip based technology, on how to implement them, how to make them convenient for the end user, there is a large field of investment, but on the core part around the microprocessor, the security will keep being a hot topic, of course. Contactless is certainly something that will lead to spectacular developments.

SI: Thanks for your insights on Eurosmart 2020 vision.