The use of contactless devices for transactions has become increasingly popular over the past few years, leading to contactless smart cards and radio frequency identification (RFID) gaining greater market presence. When security and privacy concerns were raised about the use of contactless smart card technology in e-passports, travel documents, and contactless payments, it showed that the market still lacked a clear understanding of what smart card technology is able to do in terms of security and processing.

This concern is further aggravated by the fact that there is much confusion in the market over the similarities and differences between RFID and contactless smart card technology. Hence, there is an immediate need to crystallize the market’s understanding of the differences between RFID and contactless smart card so that better informed decisions can be made and suitable applications be employed for each technology. This will also help boost the growth of the two technologies.

Contactless smart cards do not require direct contact with the reader and hence provide convenience, durability, and speed. Additionally, they are typically more secure than RFID cards as they are equipped with the ability to perform encryption and authentication processes with the reader. Contactless cards have become popular in a several key applications such as mass transit, government transactions, banking, and access control. Additionally, trials are also underway to convert the SIM, used in mobile communication networks, into contactless cards so that mobile phones and personal digital assistants (PDAs) can be used for contactless smart card transactions.

Supply Chain Remains Key Application Area for RFID

On the other hand, RFID was created with the intention of tracking goods and items, with the aim of holding less sensitive information on the tags. One key advantage RFID has over bar code is that it negates the need for line-of-sight scanning. Additionally, RFID scanning can be done at much greater distance of more than 90 feet. Supply chain remains a key application area for the technology today.

Warehouse management, product inventory tracking, store shelf management, and container tracking are among the activities where RFID is able to help in the management of supply chain and logistics. Wal-Mart’s mandate to its suppliers worldwide to migrate to RFID technology is likely to further lend to the growth of RFID. "Among the more developed applications, supply chain management and areas where bar codes currently preside, hold the most obvious applications," notes Michelle Foong, Industry Analyst of this research service. "It is the fastest growing segment in the Asia Pacific region and is likely to gain more prominence in the future."

Market estimates put the number of contactless smart card unit shipments in the Asia Pacific region at approximately 230 million cards in 2006. Government ID took up the highest proportion of the units shipped, over 45 percent, followed mass transit which contributed more than 40 percent of the shipments. "Of the key application areas for contactless cards, the contactless payments segment is expected to grow the fastest until 2010 in the Asia Pacific region," says Foong. "For RFID, supply chain, access control and mass transit applications are expected to be the major contributors to overall revenues."