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June 2005 • Volume 10 Number 6
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Feature of the Month
Smart Cards - The Latin American Market A number of market factors are now starting to drive smart card deployment in Latin America. The migration of mobile telecommunications operators to GSM technology, the migration to EMV in the financial sector, the move to smart transit fare cards and new government and commercial secure identification initiatives are all contributing to the growth of the smart card market in Latin America. This article provides an overview of Brazilian and Mexican smart card markets and describes the Smart Card Alliance Latin America initiative.
Brazil alone holds a large portion of the Latin American market in all industries. It is by far the most populated and largest country and one of the most technologically advanced countries in Latin America. Both the mobile telecommunications (GSM) and financial markets are key drivers for smart cards in Brazil, with Brazil being the largest Latin America market for GSM applications. All Brazilian mobile carriers, with the exception of Vivo, have begun to adopt GSM, migrating away from TDMA and CDMA. Brazil is also now deploying EMV-compliant smart cards for financial payments. This is clearly an advantage for Brazil's banking industry in comparison to other Latin American countries who have not yet started to convert to smart cards in the banking sector. Deploying EMV-compliant smart cards gives Brazil an edge in security and fraud protection. The potential for smart card market growth may be the highest in Brazil since Brazil requires its citizens to have national identification credentials. With Brazil's population of approximately 186 million and with 73.9% of the population over 15 years of age, the potential exists for the deployment of approximately 137 million smart cards if Brazil were to change its national identity credential to a smart card-based system. Since the year 2000, Brazil has had laws that would promote smart card industry growth, especially in the areas of secure credentials and smart card tokens used for authentication for taxes. Even though these laws have been around for many years, the enforcement of these laws has not yet occurred, mostly because of the lack of educational materials and a lack of suppliers that could provide the government with a reasonable price for these services. With these things in mind, it is expected that new Smart Card Alliance Latin America initiative will be well received in Brazil.
Telecommunications, financial and identification applications are also important in the Mexican market. According to Cofitel's Telecoms Sector Production Index, Mexico's telecom industry is experiencing its fastest growth since 2000, with 22.5% growth in the 3rd quarter of 2004 compared to the same quarter in 2003. Growth is due to the overall Mexican economy recovery and introduction of new technologies. Mobile traffic had the strongest growth, 43.6%, in part due to the migration to GSM. Mexico had over 35 million mobile users at the end of the 3rd quarter, up 24.2% from 2003.[1] According to the Dept. of Commerce, five cellular service companies are providing national coverage in Mexico. [2] The Mexican government is working towards the implementation of national identification cards as well as health cards, providing the potential for strong smart card market growth in Mexico. Mexico has a population of approximately 106 million according to the CIA World Facts Report, with 68.9% of the population over 15 years of age. If Mexico establishes a smart card-based national identity credential, the potential smart card deployment would be approximately 73 million cards. The Mexican banking sector will also be converting to smart cards in order to reduce fraud and counterfeiting. The assigned date for EMV card deployment has been set for the year 2007. Being only two years away from the deadline, the local financial industry has started to move quickly to ensure that the assigned date is met.
Unlike other regions of the world, Latin America has no smart card industry association that can serve its needs. According to a recent Frost & Sullivan report, the lack of an effective industry association is viewed as a restraint on the security and access control market in Latin America, with manufacturers viewing such an association as needed to bring together suppliers, partners and customers. [3] In early 2004, the Smart Card Alliance recognized this need in the Latin America market and applied to the U.S. Department of Commerce's International Trade Administration (ITA) for a grant to expand activities from being focused on the U.S. to Latin America. In October, 2004, ITA awarded a $288,000 grant to the Smart Card Alliance. The grant duration is for three years and has the goal of expanding the U.S. smart card industry into Latin America and the Caribbean Islands. The Smart Card Alliance program has several key elements that are designed to help expand the market for smart cards in Latin America and accelerate smart card-based application implementation. Education and information. Education is a critical step in market development. Smart Card Alliance educational workshops and conferences will provide both technical and business training to help governments and enterprises put together successful smart card programs. By providing education and information resources on smart card technology, standards, best implementation practices and organization case studies, the Alliance can help Latin American organizations more quickly define and implement smart card programs that deliver business value. An example of this was the Alliance Educational Institute program successfully implemented at the Cards 2005 conference in Sao Paulo, Brazil. Attendance at the conference was high and there was much interest from organizations who wanted to better understand both the technology and the business drivers behind it. Industry forum. One of the undisputed benefits of an industry association is the forum that it provides for suppliers, government organizations, enterprises and users to get together and explore new ways of approaching common business goals. The Smart Card Alliance Latin America initiative will accomplish this in several ways - through focused activity at existing industry events, development of Latin America-specific smart card events, sponsorship of trade missions that bring together smart card industry executives and Latin American government and industry leaders, and establishment of a dedicated organization that will focus on the needs of the Latin American market. International collaboration. In addition to providing education and connections among users and vendors, the interaction among North and South American users will help to encourage deployment of common, standards-based approaches that ease implementation and lower the overall cost of deployment.
To initiate Alliance Latin American activities, the Smart Card Alliance participated in security and card technology conferences in Brazil and Mexico in early 2005. Via Forum - Security Week and Cards 2005 - Brazil. The Smart Card Alliance participated in two conferences in Sao Paulo, Brazil, the Via Forum - Security Week in March and Cards 2005 in April. By talking directly with the many industry contacts at these two conferences, the Smart Card Alliance was able to better understand the needs of the Brazilian market. For example, local suppliers and integrators indicated that they have a need for an association such as the Smart Card Alliance to represent them in government and to assist them in the education of their clients. Through the educational course on smart cards presented at the conference, the Smart Card Alliance was also able to communicate the current state of the industry in the U.S. Security Mexico Conference. The Alliance participated in the Security Mexico conference in May. Conference attendees were pleased to see that the Smart Card Alliance was establishing a Latin American chapter specific to their needs, with translated documents and information about solutions targeted to them. As a result of the conference, the Alliance determined that there is a need for a unifying conference to satisfy the needs of the smart card industry in Latin America. Attendees indicated an interest in the Alliance Latin America chapter to take advantage of the experience and lessons learned from an established industry group in the United States.
Participating in conferences in Brazil and Mexico gave the Alliance the opportunity to explore and understand the local security industries, current Latin American technologies, and the smart card solutions being deployed in the local markets. Additionally, the Alliance was able to interact with local suppliers, integrators, and end users of the technology and understand their needs. The Latin American smart card market is now emerging and could develop more rapidly than other markets by leveraging lessons learned from similar smart card initiatives and by forming business partnerships that can quickly deliver successful implementations. Smart Card Alliance activities are focused on encouraging just such industry cooperation. By providing an educational and collaborative forum that brings together industry participants, the Smart Card Alliance hopes to help manufacturers, issuers and end users deploy solutions that improve security and provide unique business value. The ultimate goal of these activities for the smart card industry is to accelerate the adoption of smart card technology and fuel business growth in both North and South America. Interested parties wanting to participate in the Smart Card Alliance efforts in Latin America should call 1-800-556-6828, or send an email to info@smartcardalliance.org .
References [1] "Telecoms traffic, clients up 22.5% - Mexico," Business News Americas, 11/26/04 (citing Cofitel's Telecoms Sector Production Index)
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