Meeting the Challenges of the Smart Card Connector Market
By Gijs Werner, Global Market Manager, FCI Electronics

In one form or another, smart cards are rarely far from today’s headlines. Governments across the world are implementing a variety of health, social security, and ID card schemes. The banking and finance sector is continually looking to extend the reach of “chip and pin” debit and credit cards. Add to these the ubiquitous SIM card and an ever-growing list of applications—including payment terminals, set top boxes, vending machines, and access control systems—and the significance of these markets in terms of connector applications starts to become clear. According to the Eurosmart Association, there were well over four billion smart card shipments in 2007 alone, and all predictions are for continued growth.

However, a period of change and transition is also underway, with the increasing adoption of RFID-based, wireless Near Field Communication (NFC) in both cards and cell phones likely to have a major impact.

The current level of interest makes it easy to forget that the history of the mass market smart card stretches back to the early 1980s, when France introduced the Télécarte system for use in public pay phones. More than 20 years later, Europe can still claim to be the home of the smart card, particularly within the banking sector. Europe is far ahead of the U.S. in terms of the adoption of IC-based credit and debit cards.

Driven by concerns about fraud, chip and pin has become the norm across most of the continent, with an emphasis on further integration of credit and debit transaction handling. Tentative steps are being made in Europe towards so-called cashless societies. In contrast, the U.S. remains much more attached to the traditional magnetic stripe card for banking applications. The vast infrastructure in place to support such cards clearly represents a major obstacle to the wider use of smart cards, and technology such as MagnePrint provides another route towards greater protection against card skimming, potentially extending the life of the magnetic card a while longer.  

In an era of heightened security concerns, much attention has also been focused on the introduction of smart card-enabled ID cards and passports across the world. However, this tends to obscure the fact that for a number of years, governments have looked to smart cards to improve the efficiency, security, and user-friendliness of a range of state-administered healthcare and welfare services. The commercial arena is equally dynamic, with novel applications continually emerging.

Despite the diversity and dynamism of the market, the vast majority of smart card connector applications can be characterised as straightforward in terms of their basic designs and technologies. Durability, mechanical stability, reliability, and security tend to be key issues, as does adherence to key specifications, such as EMV, PCI PED (Payment Card Industry PIN Entry Devices), and ISO7816.

Of course, there is continual product development, but this is evolutionary rather than revolutionary, and reflects the broader trends in the electronics component industry, such as the search for more efficient use of space. Consequently, commercial issues—including time-to-market, security of supply, and value for money—tend to prove most critical for OEMs. As far as metallurgy is concerned, again the emphasis is on proven performance rather than on cutting-edge innovation; for most applications, the need to support a high number of cycles favors gold for contact plating.

Clearly, the success of most smart cards is built on universal acceptance rather than exclusivity, so standardization tends to be the norm. However, customization of connectors can play an important role. In particular, OEMs tend to pursue different strategies in terms of defending terminals against skimming attacks via the connector, and this is reflected in different end-solutions for different customers. Customizing connectors also provides a useful tool for OEMs looking to protect their designs against the commercial threat of copycat design.  

A similar story is true of the vast SIM card connector market. Here, the process of miniaturization has pretty much run its course. Indeed the typical SIM connector is now little more than a set of contacts. Once again, major design innovation is not the key factor; OEMs are looking for a solution that meets well-established standards and specifications. Given that the life cycle of a cell phone design is now measured in months, it is much more critical that suppliers provide high volumes to meet tight delivery deadlines. Manufacturing and supply chain efficiency is every bit as important as product quality and price competitiveness. 

For those connector manufacturers that have succeeded in meeting the demands of established smart card markets, the growing influence of NFC technology presents new challenges and opportunities. NFC is poised to make a major impact, though precisely what form it will take is the subject of some debate. While these wireless systems may ultimately replace at least some smart card connector applications, NFC terminals will also create a host of new interconnection requirements.

As with the market in general, the current level of hype surrounding NFC tends to belie the fact that it is already well established as a contactless smart card technology. To date, NFC applications have typically focused on low-value transactions, in particular, public transport systems within large metropolitan areas. However, there is now a real desire on the part of a number of stakeholders to extend the use of NFC into areas that have, to date, remained the preserve of notes and coins.

Furthermore, there is still unresolved debate as to how this growth will be facilitated. Public transport cards, such as London’s Oyster scheme, are evolving into electronic purses that can be used in a wide range of retail outlets. Equally, the major credit card companies are rolling out systems that will facilitate the use of NFC-enabled cards for PIN-free, “wave-and-pay,” low-value transactions.

Significantly, Japan has lead the way in the use of cell phones with embedded NFC, linked to credit cards, for just the same purpose. Leading cell phone manufacturers such as Nokia are certainly keen for such functionality to become the norm, a move which could ultimately spell the end for the SIM card and its connector. However, questions remain, both about the public appetite for the cashless society, and the willingness retailers will have to replace coin and note transactions with a new NFC infrastructure.

For the moment, the impact of NFC is rather less dramatic. Payment terminal manufacturers, for example, typically offer NFC functionality via add-on modules. As such, the existing smart card connector application remains unchanged, and the additional module brings with it new connector requirements. Longer term, it is possible to see more profound changes. Security concerns notwithstanding, if NFC smart cards, of one form or another, can replace the huge number of transactions that have always been the preserve of cash, a raft of new applications will emerge.

Of course, if the cell phone becomes the preferred form of electronic purse, then the days of the SIM card connector may ultimately be numbered. However, this is by no means an inevitability. There is a strong business lobby behind the SIM card, both as an extremely cheap means of data storage and as a marketing tool. Equally, there is rigorous debate over the relative security merits of removable SIM cards on one hand, and embedded NFC on the other.

Whatever direction the various smart card markets take over the next few years, it is equally clear that connector manufacturers are not in a position to influence these changes. This is not a market in which major breakthroughs in connector design or technology will play a pivotal role. Instead, the emphasis is very much on adherence to global standards, and the development of ever-more compact, more durable, more secure and more economic design solutions.

In the long term, the connector manufacturers best able to take advantage of the dynamic and growing smart card market will be those that maintain close relationships with customers, and respond quickly and positively to their requirements for faster time to market, competitive pricing, and secure sources of high volume supply.

Gijs Werner is the global market manager, commercial business, for FCI Electronics. Werner is a graduate in economics. He spent three years as a marketing consultant before joining Berg Electronics in 1998 as product manager for the Basics+ portfolio. Since moving to FCI, Werner has assumed a variety of regional and global product and market management responsibilities.

For more information, visit www.fci.com.