Revıewthe

Autumn 2010

Ancient and modernHow Turkey became a world leader in digital innovation

The art of innovation

EMV banking cards – coming to America?

How technology is changing our world

Security for cloud computing

The internet of things

Upfront

2 The Review

As an American citizen, I long for the day when the United States is at parity with the rest of the developed world in introducing EMV banking cards.

I believe we are seeing a shift. Increasing pressure for greater convenience has come from dissatisfied US card holders who frequently travel abroad and can’t use their cards overseas. This problem only grows as more countries, including neighboring Mexico and Canada, complete their migration to EMV. Convenience is a real motivator for change, along with another good reason for migration: reducing fraud by improving security. Read our full report on page 22.

And because innovation is the engine that powers our modern digital world, it is a recurrent theme in this issue of The Review. On page 26 we introduce two advanced projects, in Europe and Latin America, that aim to make it easier for individuals, businesses and governments alike to communicate and trade across borders. On page 32 we investigate the art of creativity, which leads in turn to thoughts of the entrepreneurs who have started off with a great idea and gone on to fundamentally change how we live – like Swiss physicist Jean Hoerni, whose invention has improved the way we stay entertained, informed and connected. And on page 30, trendspotter Magnus Lindkvist predicts the main innovations that will change the world around us.

Wherever you look in the world, the latest advances in secure digital technology are helping to make almost everything people do faster, safer and more convenient. Like in Turkey, for example, which we examine in detail on page 18. And on page 8 we report on how the latest research into cloud computing security shows that companies that have yet to make use of the cloud really have no reason to fear it.

Cloud computing is perhaps the ultimate example of how national borders are increasingly meaningless in an interconnected world – and just one reason why this is such an exciting time to be working in the field of digital security.

Paul BeverlyExecutive Vice President, Marketing, and President North America, Gemalto

An interconnected world

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The Review is published by Gemalto Corporate Communications – www.gemalto.com

© 2010 Gemalto – www.gemalto.com. All rights reserved. Gemalto, the Gemalto logo and product and/or service names are trademarks and service marks of Gemalto NV and are registered in certain countries. The views expressed by contributors and correspondents are their own. Reproduction in whole or in part without written permission is strictly prohibited. Editorial opinions expressed in this magazine are not necessarily those of Gemalto or the publisher. Neither the publisher nor Gemalto accepts responsibility for advertising content.

For further information on The Review, please emaillaurence.manouelides@gemalto.com

The Review is printed on 9Lives 55 Gloss & Silk paper. Certified as an FSC mixed sources product, 9Lives 55 is produced with 55% recycled fiber from both pre- and post-consumer sources, together with 45% FSC certified virgin fiber from well-managed forests. C

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Your award-winning magazineThe Review was named Best

Business-to-Business Title at the APA International Customer

Publishing Awards in November 2009. The prestigious

awards recognize excellence in customer publishing

worldwide.

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4 DigiTAl DigEST_What’s new in digital security

8 RESEARcH_Securing the cloudThere’s no reason for enterprises to fear cloud computing

12 THE big picTuRE_The next generation4G technology is coming to Japan

14 bullETin_News in focus: the importance of trust in banking; the Splinternet; India creates the world’s largest biometric identity database

18 SociETY_Ancient and modernHow Turkey became a hotbed of digital innovation

22 SoluTionS_EMV may be coming to AmericaBanks in the United States are on the brink of introducing EMV chip banking cards. Why now?

26 SoluTionS_United nationsWe report on two major projects that aim to make cross-border communications easier

28 globAl SnApSHoT_Significant facts and figures from around the digital world

30 TREnDS_The democracy of technologyTrendspotter Magnus Lindkvist on the technology of the future

32 innoVATion_Creative solutionsHow do you foster innovation? We investigate the art of creativity

36 in bRiEf_News and success stories

38 DigiTAl liVES_Microchips and mountaintopsThe remarkable life of Swiss physicist Jean Hoerni

Cath has been writing about business and technology since 1992. She was a news reporter and editor for 10 years in both the UK and California before going freelance in 2001.

contributorsTamsin oxford

Contents

The founder of UK magazine The Skeptic, Wendyhas written about science and technology for many titles, including Wired, Scientific American and New Scientist.

Tamsin has been a journalist and editor for 18 years. She specializes in the consumer and business IT markets and has edited titles such as PC World Magazine.

30 “How can we make security cool and fun?”Magnus Lindkvist

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Wendy M grossman

cath Everett

The Review is produced for Gemalto by Wardour, Walmar House, 296 Regent Street, London W1B 3AW, UK Telephone: +44 (0)20 7016 2555Website: www.wardour.co.uk

EDiToR Tim TurnerDESign DiREcToR Ben BarrettART DiREcToR Steven GibbonDESignERS Pip Atkinson, Angela LyonspicTuRE EDiToR Johanna WardpubliSHER Rob SawyerpRoDucTion MAnAgER John FaulknerMAnAging DiREcToR Claire OldfieldcEo Martin MacConnol

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industry update

Digital digestFour banks and two mobile phone companies have announced plans to jointly introduce point-of-sale mobile payments (mPayments) in the Netherlands, enabling customers to pay easily and securely in stores with a wave of their mobile phone.

The partners in the scheme – ABN AMRO, ING, KPN, Rabobank, T-Mobile and Vodafone – expect it to be in place by 2012 and say that other NFC applications, such as electronic ticketing, mobile coupons and customer loyalty schemes, are likely to follow.Source: www.nfcnews.com

national nfc scheme for the netherlands

Demand for contactless smart cards in the Asia-Pacific region is expected to surge after 2012, once a number of key government-led projects involving

NFC, ePassports and mass transit systems have been completed.

India, China, the Philippines, Indonesia

and Vietnam are all expected to implement ePassports within the next five years, according to analysts

Frost & Sullivan, and the demand will continue

to surge as these passports are renewed every five to 10 years.

Meanwhile, mass transit ticketing is the second biggest application for contactless cards (after government ID), accounting for 28% of contactless cards shipped in 2009, and Frost & Sullivan believes that uptake will continue with the rise of mass transit projects across Asia-Pacific.

As a result, annual shipments of contactless smart cards are expected to rise from 590 million units in 2009 to 1.9 billion by 2016.Source: www.zdnetasia.com

Contactless cards in demand in Asia

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Gemalto regularly participates in trade shows, seminars and events around the world. Here’s a list of those taking place in the next few months:

Date Event Sector Location

25-27 Oct 2010 Mobile Roaming World Summit

Telecoms London, UK

28-29 Oct 2010 Euro 6000 Financial Services

Seville, Spain

3-4 Nov 2010 ABI 2010 Financial Services

Rome, Italy

7-10 Nov 2010 Association for Financial Professionals

Security San Antonio, USA

8-12 Nov 2010 Tech Ed Europe Security Berlin, Germany

10-11 Nov 2010 Africa Com Telecoms Cape Town, South Africa

7-9 Dec 2010 CARTES 2010 Corporate Paris Nord, Villepinte, France

4 The Review

iiiiii Slug_ Slug iiiiiiBy THE NUMBERS

52%A survey of IT security professionals at the InfoSecurity Europe conference found that 52% don’t encrypt company data before loading it onto portable USB sticks, even though the data – including intellectual property, customer data and employee details – is highly sensitive. In fact, 11% protect their data with passwords alone – an inadequate defense that is easily breached.Source: www.euroinvestor.co.uk

US$3.8 billion Although the past couple of years have been tough for the cellular machine-to-machine market, it is now starting to pick up. According to ABI Research, growth in the volume of units shipped and the increasing importance of 3G are already resulting in stronger performance, and in 2015 the market will be worth an estimated US$3.8 billion.Source: www.abiresearch.com

11%The number of smart cards shipped worldwide in the period from 2009 to 2015 is predicted to show an 11% compound annual growth rate, according to analysis from Frost & Sullivan. The report says this growth will be fueled by smart card based transit projects in major cities around the world – especially in Europe, where several trials of the use of NFC technology for mobile ticketing are at an advanced stage.Source: www.contactlessnews.com

As good as new

Between them, the 10 nations that issue the most ePassports will be producing 77 million documents annually by 2014, according to research by Acuity Market Intelligence. Acuity’s report predicts that the top 10 issuing countries – India, the US, China, Brazil, the UK, the Philippines, Japan, France, Canada and Indonesia – will account for 59% of global ePassport issuing volume in 2014, bringing in US$2.7 billion in revenue.

One of those countries, the UK, is releasing a redesigned ePassport in October, with improved security features and iconic images from across the country, including the white cliffs of Dover, the Giant’s Causeway and Ben Nevis.

The use of these images, created using special printing techniques, is one of a number of new security features in the passport. Others include:• Moving the chip that stores the holder’s

details to the inside of the passport’s cover, where it will no longer be visible. This gives additional physical protection, as well as making it harder to replace the chip without damage to the passport cover being spotted

• A secondary image of the holder that is printed on the ‘observations’ page

• A transparent covering that includes holograms to protect the holder’s personal details.

Sources: www.contactlessnews.com and www.secureidnews.com

One side effect of the ever-growing sophistication of mobile phones is that consumers are upgrading with increasing frequency. In the past, many of the phones they discarded made their way to developing countries, particularly in Africa, but now the market for refurbished mobiles is taking off in the developed world as well.

In the United States, for instance, carriers routinely take in broken devices and repair some of them for resale to subscribers. AT&T, Verizon Wireless and T-Mobile USA all offer refurbished devices of some sort.

Environmental and social concerns are a major driving force in this market. Recycling mobile phones has become particularly important to combat the growing problem of electronic waste. “Our process keeps the product out of landfills, reutilizes devices and their original materials and conserves resources,” says Eric Forster of cellphone recycling

giant ReCellular, which processes an average of 20,000 phones every working day.

Refurbished phones are also valuable to non-profit groups that use the devices to connect people in need. For example, Verizon’s HopeLine program collects phones, batteries and accessories, refurbishes them and donates the finished product to groups that provide services to victims of domestic violence. Since 2001, HopeLine has distributed more than 90,000 phones.Source: www.wirelessweek.com

The rise of the ePassport

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industry update

The Review

Everything is connectedThe five billionth device was connected to the internet in August this year, according to IMS Research, which has been tracking the installed base of internet equipment.

IMS Research President Ian Weightman identifies three waves of internet connectivity. “In the first wave, the bulk of devices connected to the internet were PCs and laptops, plus their associated modem and networking equipment,” he says, adding that there are now more than one billion computers connected to the internet.

The second wave included mobile phones, netbooks, tablets, digital picture frames and internet televisions, and it is this that has pushed the number of connected devices past the five billion mark.

But it is the third wave that will have the most dramatic effect as machine-to-machine connectivity sweeps the world. “This has the potential to go way beyond industrial applications to encompass increasingly sophisticated smart grids, networked security cameras and sensors, and connected home appliances,” says Weightman, who predicts that this will take the number of connected devices to 22 billion.Source: www.v3.co.uk

Anyone who’s used a mobile phone will be familiar with ‘fat finger syndrome’, where you hit the wrong button and misdial, or mistype an SMS message. Imagine how much worse it would be if your fingers really were fat.

That’s the problem facing sumo wrestlers in Japan. As the newspaper Nikkan Sports reported: “When they try to send email on mobile phones or PCs, they often end up pressing two or three keys at once.”

Because of the small size of typical mobile phones, most of Japan’s 51 sumo training stables rely on faxes and landline

phones. However, a series of scandals have affected the sport in recent years, and poor communications were seen as part of the problem in dealing with the press fallout.

Now the Japan Sumo Association (JSA) has said it will distribute 60 Apple iPads to the training stables. “We will hand out the newest iPads to all the sumo stables to swiftly communicate what we need to,” said JSA Vice Chairman Hiroyoshi Murayama. With its large touchscreen keys, the iPad should be a dream come true for the giant wrestlers.Source: www.cellular-news.com

Why sumo wrestlers like iPads

8 The Review

The Review takes an in-depth look at the current state of cloud security and finds that there’s no reason to be afraid

Securing the cloudAuTHoR DAVEy WINDER

ADDiTionAl RESEARcH TAMSIN OxFORD

illuSTRATion CHRIS KEEGAN

Research_ Cloud computing

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The global market for enterprise cloud-based services will grow from US$12.1 billion (€ 9.4 billion) in 2010 to US$35.6 billion (€ 27.5 billion) by 2015, according to the report ‘Enterprise Cloud Services: Worldwide Forecast

2010-2015’ from Analysys Mason. Yet while tech-savvy enterprises such as Amazon, Cisco, IBM, Google and Microsoft have well and truly embraced cloud computing, many businesses have resisted, held back by fear. The fear of data security breaches, that is.

The Mimecast ‘Cloud Adoption Survey’, published in July 2010, suggests that business perception hasn’t changed greatly in the past 12 months. While 57% of those who had adopted cloud services said that security had improved as a result, 62% of those who hadn’t still insisted that storing data on external servers was a ‘significant’ risk.

Defining the cloudOne of the problems when it comes to talking about security in the cloud is defining what ‘the cloud’ is and what needs to be secured. What most people do agree on is that cloud computing offers a compelling balance of three key elements: security, convenience and cost. While there are some security issues, they can be significantly outweighed by the convenience and cost benefits offered by well-implemented and well-structured cloud-based solutions. The outsourced business solutions that the cloud offers make it cheaper, especially for smaller firms, to gain access to the kinds of applications and server power that only larger enterprises have traditionally been able to afford.

Matt Ballantine is head of IT at Imagination, a creative communications agency with clients that include Ford, Shell,

Jaguar and Land Rover. “We run complex global events, with 300 to 450 staff in 14 locations around the globe and an IT team of 14 based in London,” he says. “When it comes to collaboration tools, cloud computing is a no-brainer, as it gives us the ability to deliver services at a manageable level. It’s given us global reach, stability and scalability, and massively reduced our costs.”

Ivan Retzignac, CEO of MedicAnimal, an online veterinary supplier, is equally positive. “We are a high-growth company and it is particularly difficult to estimate our server and infrastructure costs, as traffic is growing too erratically, and too quickly, to forecast. As such, the flexibility and ease of scaling resources that the cloud offers is absolutely essential.”

Cloud computing offers scalability at a significantly lower total cost of ownership, with a greater variety of applications that are far better than those that most businesses could have built themselves. “People are now able to do things they were unable to do before,” says Ballantine. “I recently had an email from a member of staff telling me how, using video chat, he had just watched the first big dress rehearsal for a major event

“The cloud makes it cheaper for smaller firms to gain access to applications and server power that only larger enterprises have traditionally been able to afford”

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we were running for a client in Hong Kong. There is no way I could have achieved this using a traditional IT model.”

Here to stayCloud computing is here to stay: that much is clear. The important thing now is to develop cloud security to meet the demands of a growing market. “Security will always be key, and a major differentiating element among service providers,” says Retzignac. “It is always at the forefront of our decision-making process.”

However, this isn’t a simple matter. “It can be substantially more difficult to understand and deal with the risks of cloud computing than with the traditional integrated models that businesses used to have,” says Sameer Kochhar, a director at LastPass, an online password manager and form filler for secure web browsing and management. “Ten years ago, the cloud phenomenon didn’t exist in the online applications world; businesses were in total control of everything. Now you have little control over how those services are maintained, where the servers are located, how security is audited and other such considerations, making it difficult to quantify the risks.”

A June 2010 report from the IDC entitled ‘Securing Identities is Key to Success in the Cloud’ breaks down cloud computing into three different archetypes or models: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

Under the SaaS model, third-party cloud providers deliver a full application service to end-users. PaaS uses a cloud-based infrastructure to deliver

customer-based applications, while IaaS enables businesses to deliver their own services by providing them with cloud-based equipment.

The downside of the SaaS model, the most mature of the three, is that you pass the majority of your control over to a service provider. “You need to get the correct assurances about

infrastructure security, physical security, access controls, authentication and, importantly, auditing, before entering into a contract,” says Rik Ferguson, Senior Security Advisor at Trend Micro.

Theo Dimitrakos, Head of Security Architectures Research at BT Innovate & Design, agrees that different kinds of cloud services expose different entry points into the cloud provider. He says the ‘Cloud Computing Risk Assessment’ report by the European Network and Information Security Agency and the security guidelines of the Cloud Security Alliance (CSA) give more information on best practice in cloud-based security.

identity managementIn the old days, security meant putting a firewall around your physical network in your office and giving people a password

to access it. The nature of cloud services, and the reason they work, is that you can access them from anywhere, so there has been a shift from strong border security to identification-based security.

Eighteen months ago, when The Review last looked at the cloud from an infrastructure perspective, we identified the Higgins Open Source Identity Framework as the key player in using cryptographic exchanges to secure claims-based identities. Today, the talk is more generic and centers around robust and trusted access-control management systems.

Single Sign On (SSO for short) is the most generic, and obvious, approach to cloud-hosted application

“The simplest and most elegant way of strengthening identity-based security is to deploy a two-factor Single Sign On solution incorporating two-factor authentication”

The Review

Research_ Cloud computing

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deployments. “An optimal access control management and SSO system must be centrally managed and have interfaces designed to extend the trust model into cloud systems,” says Dimitrakos.

“Federated authentication of users to cloud IT systems can increase the overall security model of those systems,” he adds – and it also simplifies the access control processes for existing authenticated users. Organizations that have already implemented role-based identity management systems should find it relatively simple to extend this management into the cloud.

There are several SSO solutions currently available on the market today and all offer their own unique solutions to one of the biggest problems with regards to cloud security – the user.

The weakest linkWhen you move to the cloud, there may no longer be a PC under the desk, but the user is still the weakest link in the chain.

“Most people have terrible habits when it comes to passwords,” Kochhar confirms. “They use the same passwords everywhere, and some write them on sticky notes and put them on their monitor. You can have a software provider with the best security on the market, but if one employee happens to choose a bad password that can be guessed in a social engineering attack, it can be catastrophic. Login credentials are critical to the whole security package.”

Ballantine adds: “If all the people working with your security aren’t aware of their obligations, then it’s going to be like plugging holes in a dam that will burst one way or another. Security also needs to be elegant – it has to work and not get in the way. The moment it gets in the way of people getting their jobs done, they’ll move on to something else that doesn’t.”

The simplest and most elegant way of strengthening identity-based security is to deploy a two-factor Single Sign On solution incorporating two-factor authentication. This requires both a password and a physical token, such as a smart card or encrypted USB key, before the user can be logged in. Even if a password is discovered, without the unique hardware token present, access is denied. Such two-factor authentication enhances network security and allows enterprises to ensure that employees can securely access company information and networks, both locally and remotely.

Strong user identification, alongside sufficient investment in two-factor identification, ultimately saves businesses money. Integrated security solutions protect organizations from data security access breaches that result in costly disclosure events, lost revenue and damaged brands.

Ring of fireBut George Hess, CEO and co-founder of application security specialist Art of Defence and a prominent member of the Open Web Application Security Project, doesn’t agree that the issues lie with the user. “Users can only exploit cloud applications to the extent that the applications themselves allow,” he says. Hess suggests that proactive security features such as secure session management, form-field protection, user rights and encrypted data traffic all come into play. “My answer is, integrate a distributed Web Application Firewall [dWAF] that can handle all this.”

Firewalls as a ring fence around a hardwired network have had to adapt as everything becomes virtualized, so think of a dWAF as consisting of three modules: a decider, an enforcer and an administrator, each individually scalable as necessary.

The enforcer has two tasks: to take the security-relevant areas of the web traffic out of the web stream and hand it off to the decider, and to put the decision that results from this into action. It’s typically a plugin for firewalls, reverse proxies, load balancers or web and application servers.

The decider consists of the security policy framework and is responsible for analyzing the inbound and outbound web traffic of an application and deciding what will be done with the individual requests or responses.

Finally, the administrator allows for the management of the dWAF itself and is configurable based on applications under protection, rather than host-based. This frees up the dWAF to provide true multi-tenancy for cloud usage.

fighting the fearCloud security has come a long way in the past 18 months and, as the CSA starts to roll out accreditations for cloud-based security consultants and open quality standards for providers, more businesses may start to conquer their fears.

“I think we need a new generation of disaster recovery, a cloud recovery plan if the cloud suddenly doesn’t become available,” Kochhar concludes. “Can you migrate easily? Are you in control of your data? Can you access it offline? These questions weren’t in the traditional model, when you were in control of everything.”

There are many risks, some quantifiable and others not, surrounding security in cloud computing, but it is ultimately all about that balance between security, convenience and cost. If an organization understands the security concerns and what they mean, and is prepared to deal with things when they go wrong, then there is no reason why it cannot move into the cloud with confidence and experience the benefits for itself.

62% of firms surveyed said storing data in the cloud was a risk

12 The Review

www.gemalto.com 13

The next generationThink of Japan and you may well think of a high-tech cityscape like this view of Tokyo’s busy Shinjuku Station. Japan is one of the most technology-friendly, digitally connected countries in the world, so it’s no surprise that it’s at the forefront of the adoption of high-speed 4G mobile connectivity. NTT Docomo trialed a prototype 4G system back in 2007, and it is due to launch Japan’s first commercial 4G network in December, offering 5MHz mobile bandwidth for 37.5Mbit/s downlinks and 12.5Mbit/s uplinks.

The technology

Gemalto is a key player in the development of 4G, helping its customers to deploy new value-added services that take advantage of 4G’s speed and IP connectivity. It is also part of ng Connect, a program that aims to foster collaboration among infrastructure, device, application and content companies, in order to deliver new applications that will shape the market.

The big picture_ Mobile telecoms

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news in focus

BulletinTrust is good for business

■ People expect to do more online these days, and banks that meet these expectations will gain a competitive advantage over those that see the internet as nothing more than a way to cut costs. Innovation and vision must lead the way, but trust and security form a barrier; customers will only use the online channel if they trust it.

When security is poor, however, everyone focuses on the cost of fraud and the difficulty of developing new services in an insecure environment. This makes it hard to upgrade security – and to develop new business opportunities.

In many cases, banks base their business case for improved security solely on the direct costs of a fraud incident. This is rarely enough to justify an investment in stronger security, such as two-factor authentication. Yet it only takes into account a tiny proportion of the total costs, which may also be indirect or reputational.

Ultimately, you need to have a baseline of trust and security. Customers need to feel confident to transact with you online. Staff need to be free to focus on business development and service innovation rather than firefighting security problems. Only when a secure foundation exists can banks build new high-value services online.

The trend in northern Europe is for branches to switch focus from

low-value transactions, such as cash withdrawals and check deposits, to high-value sales, such as loans and business advice. With the right security, a bank’s online portal can become an integrated part of this trend. It can also take care of many more low-value transactions and enable completely new lines of business. For example:• Improved eCommerce security can

help increase online spending and card usage.

• Banks see a 60-70% reduction in fraud when they use a security solution for online shopping.

• In western Europe, shifting a customer from the branch to the online bank may generate a cost saving of as much as € 10 on each transaction.

• Banks process millions of utility bill payments every month. Typically, utility companies pay about € 1 per invoice per customer. If banks used their security and authentication services to automate invoicing, it could reduce utility companies’ costs, increase bank profits and make life easier for customers.

Trust and confidence are valuable

assets for banks. In the 19th century, they invested in lavish marble halls and iron strongrooms to encourage deposits. Today, robust authentication and trustworthy online services play the same role. If banks want to attract customers, upsell new services and out-compete their rivals, they need better security. It’s not just a cost of business. It’s good for business.

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Banks are waking up to the potential of online banking to create new business opportunities.

But it will only work if they change the way they build a business case for trust and security

“If banks want to attract customers, upsell new services and out-compete their rivals, they need better security”

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Apple or Facebook gain traction with their closed environments, their competitors will fight to create standards that will limit proprietary control.”

• Vendors will evolve to automate Splinternet application development: “… we expect a rise in modular marketing creation, where marketers create assets once and then new technologies automate the assembly and delivery of these assets into brand experiences that are optimized for specific users and specific access points,” says the report.

• The internet’s innocence will be lost. The report concludes: “While the Splinternet will create some chaos in the interactive world, it will also surface new modes of experience, ways for people to connect, and devices that drive interactivity well beyond the computer.”

■ The content on social networking sites such as Facebook and LinkedIn is only accessible to people with passwords, making it invisible to search engines. Mobile devices such as smartphones and eReaders use proprietary operating systems. Newspaper content is starting to disappear behind paywalls. The new paradigm for the web is a world in which information is not available to all, andthe term ‘Splinternet’ has been coined to describe this fragmentation.

In part, this is simply a reaction to the issues facing developers. Previously, they have tried to create new applications that will run in all internet browsers, including legacy versions, while ensuring that a range of smartphones are supported. This all takes time and money, and it’s increasingly becoming unsustainable as the range of proprietary platforms expands.

But futurologist Ian Pearson argues that splintering and a return to proprietary formats is cyclical. “The whole debate about ‘walled gardens’ has come and gone a few times now,” he says, “from AOL in the early days of the web to what Google is trying to do now with Android. Technology companies will always try to lock you into their formats.

“What’s happening with Google Android is really a direct response to what Microsoft and Apple are doing with their products and services. They all want a monopoly and will do all they can to create one.” Apple’s refusal to support Flash-based applications on the iPhone or iPad is a prominent example of this strategy, and one that frustrates users.

For the time being, though, most consumers are unaware of the Splinternet. After all, they can use the same browser to access all their social networks, and the fact that mobile internet is booming means many people have the impression that they can use services for free anywhere, through any device. This isn’t entirely true.

“Most consumers don’t care about formats, but they do care about content and technical innovation, so the format owner who can address those needs will win hearts and minds,” says Mark Johnson, Creative Director at digital marketing agency Sequence. “Technology standards will always reassert themselves, because content owners will always want maximum reach. This means developing

current standards so that they rival proprietary platforms. Either that, or the dominant platform becomes the standard by virtue of its reach and penetration.”

It’s not all bad news for proponents of unified standards. Ané-Mari Peter, Managing Director of web developer on-IDLE, points to “the exponential rate of open source development in virtual communities and gaming. This is being driven by the desire to make content available and to earn from that content. The market is simply expanding.”

So what does the future hold for the Splinternet? An independent report published by Forrester Research, Inc. in January 2010, simply titled The Splinternet, makes four predictions:• Apple will continue to create proprietary

platforms. “In the name of better user experience, Apple defines the tool sets and points of access allowed on its platforms and blocks apps where it feels they threaten the ecosystem,” says the report.

• Contending platforms will call for standards: “As dominant platforms like

“Technology companies will always try to lock

you into their formats”

Has the golden age of open standards on the web and free access to information now passed?

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news in focus>

The creation of the world’s largest biometric identity database promises to improves the lives of millions of Indians

An identity for all

“This isn’t just about giving every Indian a number. It’s about giving them an identity and an acknowledgement of their existence by the state. That has huge social benefits”

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■ Like many countries, India carries out a census every 10 years. But the survey of the population that started in April is particularly significant.

With the population estimated at 1.2 billion people, it will be the largest census ever undertaken, taking 11 months to complete and involving about 2.5 million census-takers. It’s all part of the Unique Identification (UID) project, which will give every Indian citizen above the age of 15 access to a unique 12-digit number called an ‘Aadhaar’ (‘foundation’). This number will be stored in a centralized database alongside biometric information – photographs, fingerprints and iris scans – about each citizen.

The implementation of the world’s largest biometric identity database is a social experiment on a scale no government has ever attempted. India has already embraced digital ID with the eDriver’s License that Gemalto provided (see page 37). But while wealthy Indians can use this, or a passport or credit card, to prove their identity, poorer citizens have found it harder to establish who they are.

The UID project, it is hoped, will change all that. Every Indian citizen, regardless of their background or income, is entitled to an Aadhaar, making it easier for them to prove their identity when they vote in elections, for example. It will also give them access to a range of services and resources provided by both the public and private sectors, as well as services such as healthcare

and micro-banking, often for the first time.

Many poorer people have until now been left out of India’s banking revolution, as they lack the documentation needed to pass the stringent checks that are carried out before a bank account can be opened. But now the strong authentication provided by the Aadhaar will make it easier for customers across India to open accounts, withdraw money and make deposits. It will also allow citizens to shop around for the best bank account, rather than having to accept whatever is on offer, making them less vulnerable to exploitation.

There is the potential to combat fraud, too, with the introduction of a secure authentication system. This will ensure that the neediest members of society do not miss out on welfare payments, and may also help the Indian government to fight terrorism.

Former Infosys co-chairman Nandan Nilekani, who is leading the project, hopes to see 600 million Aadhaars created within the next four or five years. It’s an ambitious project – and one that will create plenty of opportunities for both public and private service providers, as well as for the IT companies tasked with building and managing the system.

“This isn’t just about giving every Indian a number,” says Nilekani. “It’s about giving them an identity and an acknowledgement of their existence by the state. That has huge social benefits.”

The Review

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17

A ncient and modernAuTHoR CATH EVERETT

pHoTogRApHY JASON ESKENAzI

Turkey may be one of the cradles of civilization, but it’s also a hotbed of digital innovation – especially in the area of payment technology

The Anatolian peninsula is one of the oldest continuously inhabited regions in the world. Turkey was home to some of the most important medieval cities,

including Ephesus, Smyrna (modern-day Izmir) and Byzantium (Istanbul), and the Ottoman Empire was a major power for centuries.

If that all sounds familiar from your history lessons at school, this may be less so: Turkey has the second fastest-growing economy of the G20 countries, bettered only by China – its gross domestic product increased by 11.7% year on year during the first quarter of 2010.

And this ancient nation has enthusiastically embraced new technology. The combination of a youthful population and a highly competitive banking sector has made Turkey one of the most innovative players in the global payment card market, for example. Out of a total population of 72 million (with an average age of 28), the number of credit card users has more than tripled, to 45.1 million, over the past 10 years; the number of debit card users has more than doubled, to 67.2 million, in the same period. Turkey has the third highest level of credit card adoption in Europe, while the amount citizens spend on such

cards as a percentage of their total expenditure is 21.8%, a figure beaten globally only by South Korea.

focus on loyaltyOne of the secrets of Turkey’s success in this area was the decision made by many of its banks to merge finance with lifestyle marketing. The first to do this was Garanti Bank. In 2000, it introduced the country’s first EMV-compatible credit card programme, Bonus Card. There are now 10 million in circulation.

Bonus Card made loyalty rather than credit the focus, enabling customers to collect points when they purchased goods and services from one merchant and to spend them again with another. Participating merchants ranged from retailers and entertainment venues to airlines.

The introduction of the scheme just a year before Turkey’s 2001 economic crisis boosted its adoption. As consumers found money getting tighter, Bonus Card users were able to obtain some products for free and pay for others in installments. Another popular benefit was reduced transaction times, which meant less waiting in line.

By 2005, most of the major banks in Turkey had followed Garanti’s lead, while smaller banks

18 The Review

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Society_ Turkey

were recruited under the larger banks’ umbrellas to increase coverage still further.

A year later, the market moved to the next level when Garanti introduced the first contactless credit card for transactions of less than TLY35 (approximately € 18), including eTickets for public transportation, parking and vending machines. The card, Bonus Trink, is based on MasterCard’s PayPass system and enables customers to pay for transactions with a wave of the card, instead of their signature or a PIN. The payment technology is also available in other formats, including key fobs, watches and stickers.

Meanwhile, Bank Asya was keen to exploit what it saw as a gap in the market for EMV contactless payment cards in the public transportation and university systems. It launched its City Card, based on PayPass and Visa’s payWave, in 2008 and was also the first to introduce a prepaid card, DIT Pratik. This is aimed both at less affluent people who have no bank account and at those who don’t want to carry cash. Consumers can pre-load money onto the card, or use it in the same way as a debit card if it is linked to a bank account.

Both cards have proved popular, as they can be used as eTickets for buses, subways and ferries.

State-of-the-art touchscreen technology is widely used in Turkey. Here, a group of young people use a screen in Istanbul to find the information they need.

Support for MIFARE emulation software also enables customers to pay to drive on national toll roads that use the KGS (Kartlı Geçis Sistemi, or Card Pass System). The cards can also be used as library cards, as student ID cards and to pay for taxi rides in vehicles equipped with contactless point of sale devices.

Hasan Unal, Executive Vice President for Retail Banking at Bank Asya, says: “We think the Turkish market is one of the most suitable for contactless payment systems because citizens use credit cards widely, and the young population means there is much potential for growth.”

One of the main challenges when introducing the system was forecasting potential card usage figures so that local authorities and other parties could justify the cost of implementing the necessary infrastructure. To raise awareness of the cards, the banks ran extensive advertising campaigns and training programs for staff at retailers. It worked, and contactless payment systems have had a great impact on the purchasing behavior of Turkish consumers. Unal says that Bank Asya’s ultimate aim is for the cards to be used in all areas of daily life as a replacement for cash.

Enter nfcOther banks haven’t stood still, either. Garanti Bank has launched a co-branded loyalty card with Swiss supermarket giant Migros, while Akbank has done a similar deal with French hypermarket

chain Carrefour.In the fourth quarter of this

year, Garanti will also attempt to boost the market for mobile payments by releasing the world’s first NFC-enabled (Near-Field Communication) SIM card for Avea phones,

which it has developed in conjunction with MasterCard and Gemalto. This will enable customers to convert their cellphones into contactless payment devices for purchasing low-value items or paying road tolls without needing to buy a new NFC phone. Users will make payments using pre-paid credit or by debiting their credit cards.

Some 30,000 merchants have already signed up to the scheme and Garanti Bank expects to see 100,000 customers using the technology within a year of the launch. “Contactless devices are another incentive for retailers and the general public to get rid of paper notes and coins,” explains Hüsnü Erel, Executive Vice President – Technology, Operational Services and Central Marketing at Garanti.

“Transactions are completed in less than a second, enabling much quicker customer service, especially in outlets such as fast food chains,” he continues. This means retailers can serve more customers, whose expenditure also tends to increase, as they are no longer constrained by the amount of money in their pocket.

A third benefit of the technology is that it helps merchants to reduce the errors and risks associated with cash handling. This, in turn, results in improved service quality and higher customer satisfaction rates. “We fundamentally believe that contactless technology and a cashless society are the future,” Erel concludes.

Mobile creditThe next big step will be to enable customers to employ their mobile devices as a complement to – or even a replacement for – credit cards. A number of banks are already piloting systems for validating such large payments, but the main sticking point is developing effective business

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86%of the Turkish population own a mobile phone

“Turkey has the third highest level of credit card adoption in Europe”

The Review20

models. Turkey’s banks, merchants and telecoms operators are currently discussing how they can all work together and share revenues fairly. Nevertheless, the first commercial services are expected to appear by the end of 2010.

One of the reasons mobile payment services are expected to take off in Turkey is the relatively high number of device users. Market penetration stood at 86% at the end of March 2010, and competition between the three operators – Turkcell, Vodafone and Avea – is fierce, so they are all looking at ways to differentiate the services they offer.

One of these is mobile signature (‘mobil imza’ in Turkish), which enables individuals to ‘sign’ official documents digitally. This has a host of applications, from accessing government services (see below) to logging in to internet banking services. Turkish citizens can sign tax and customs forms using their mobile phones, and in the enterprise, mobile signature can be used to give access to secure virtual private networks.

egovernment in actionAway from the commercial world, the Turkish government is keen to deploy new technology. In 2008 it launched its E-Government Portal to provide a single point of online access to a range of public services and related information. To view this information, users simply go to the website www.turkiye.gov.tr. The site is divided into three sections – Citizen, Business and Government – but also includes a fourth area, labeled Personal, which can only be accessed with a password or mobile signature. A pilot project is currently being conducted to test the payment of taxes and tuition and other fees online.

Usage of eGovernment services is still relatively low, according to a recent report produced at Ege University in Izmir. The study

cites figures from the Turkish Ministry of Transportation and Communication that show that E-Government Portal currently has only 190,000 active users, although a million more citizens are familiar with it.

These comparatively low usage rates are attributed to two factors. First, some users have proved reluctant to go to post offices to register for passwords. Second, internet penetration is still relatively low. However, user numbers are predicted to jump to 35.8 million by 2012, according to market research firm comScore, which makes it likely that eGovernment participation will rise over the next few years. The spread of mobile internet access and mobile signature functionality are also likely to be contributing factors here.

popular passportsOne area in which the country is surpassing its peers is ePassports. The documents, introduced on 27 May this year, exceed current International Civil Aviation Organization mandates (which stipulate that passports must be machine-readable) by also including two purely optional biometric identifiers – a picture of the bearer and their signature – for additional security.

Some 300,000 Turkish citizens have already started using the ePassports, exceeding all expectations. The Turkish Ministry of Foreign Affairs is also working on a polycarbonate personal identity page laser-engraved with an image of the owner’s face to make tampering and forgery more difficult. This is due to be introduced by early 2011.

To assuage privacy fears, the ePassport includes no other data beyond the bearer’s name, date of birth, biometric identifiers, identity and document numbers. The Ministry will shortly introduce passport reader kiosks to enable people to see for themselves what information is held within the document’s chip.

Avni Aksoy, the IT Director of the Ministry, says: “The fact that the ePassports are so difficult to falsify is a very positive move, not just for the individual, but also for the country.” He adds that their introduction has had a significant psychological impact. “We keep hearing anecdotal evidence that people are proud to have a next-generation, modern-looking passport. It makes them feel like they’re in the first league now.”

300kTurkish citizens are already using the new ePassports

“The next big step will be to enable customers to employ their mobile devices as a complement to – or even a replacement for – credit cards”

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Society_ Turkey

22 The Review

It looks as though major financial institutions in the United States are considering issuing EMV chip banking cards for the first time. The Review finds out what made them change their minds

EMV may be coming to America

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As we reported in the Autumn 2009 issue of The Review, the United States is

now one of the last countries in the world that still relies on a bank card verification strategy based on online spending patterns, as opposed to smart chip and offline security. However, the level of card-skimming fraud associated with the use of magnetic stripe (magstripe for short) cards defeats that strategy, and the signs are that the US will probably adopt the more secure EMV cards in the mid-term.

The initial deployment of EMV cards in the US has been driven by the need to satisfy Americans traveling abroad who face difficulties using magstripe cards in Europe and Asia. For domestic usage, a move to EMV in the US is going to happen, driven by a combination of global pressure

and security issues. The question is, when?

fraud exportLast year, the Canadian banks, led by Royal Bank of Canada, announced that they would move to EMV cards by the end of 2010. This is a positive step for Canada, but it increases the danger of ‘fraud export’ to the US and puts it in a vulnerable position – especially as its southern neighbor, Mexico, also uses EMV cards. Briefly, if a criminal has a fraudulently obtained card, he can’t use it in countries where a ‘card-present’ transaction can only occur if the user has a PIN. He can use it, however, for a ‘card-not-present’ transaction overseas – more specifically, in the US.

A second factor is pressure from the many Americans who travel abroad, both for business and pleasure – 63.6 million in 2008, according to the US

Solutions_ EMV in the USA

The danger of ‘fraud export’ from Canada and Mexico is adding to the pressure on financial institutions in the US to issue secure EMV banking cards to their customers.

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The Review

The debate raging in the US over the nation’s reluctance to adopt the more secure EMV payment card was intensified earlier this year when its biggest retailer, Walmart, announced that it would go ahead with the rollout of EMV-compliant terminals in its US stores.

Jamie Henry, Director of Payment Services at Walmart, says the company has already implemented EMV cards in Brazil and at its Asda stores in the UK, and is piloting the technology in Mexico and Canada. Over the coming year, Walmart is planning to migrate to EMV card technology across its 4,200 stores in the US.

“Our stores in the US have terminals capable of accepting EMV cards; the hardware is in place and we’re now working on updating the software,” says Henry. “We are also working with the issuers of our corporate cards, our private label credit cards, to motivate them to move forward with EMV.”

While Walmart will continue to accept magstripe cards at its US stores, Henry says the company would like to see this phased out because it is “inherently fraud-prone”.

He says that the decision to go ahead with the adoption of EMV in the US was prompted by security concerns, as well as the desire to adopt a globally accepted standard. “We want to provide an environment for our customers that allows them to make payments to us with the highest form of security possible, and right now, in the marketplace, that is EMV. We saw this trend starting about five

Walmart leads the way

Department of Commerce’s Office of Travel and Tourism Industries. There is a growing frustration among this group that their cards aren’t accepted overseas (see panel, opposite), and there is evidence that they are starting to do something about it.

For example, a study of 1,000 US travelers by the consultancy Aite Group found that more than half have had problems using their magstripe cards abroad over the past three years. What’s more, 30% of these travelers actually left their financial institutions, saying that the experience almost ruined their trip.

US banks spend a lot of money to get these customers, and the significant cost differential between losing or retaining a customer over a card is bound to influence their decision making. There is also an increasing awareness in the press that the fact that

Americans cannot use their payment instruments overseas is a problem.

Taking the leadA further push is coming from the fact that smaller financial institutions, such as United Nations Federal Credit Union (UNFCU), are taking the lead. In May, UNFCU became the first US financial institution to issue EMV-compliant, dual-interface cards to American customers. Initially, it is replacing all its credit cards with the dual cards by the middle of 2011, after which it will consider extending the program to debit cards.

Merrill Halpern, UNFCU’s card services manager, says the need for a more internationally accepted payment card came from the extensive traveling done by its US members, as well as the fact that half of UNFCU’s members reside outside the US and travel

worldwide. “For a long time, we had ongoing remarks from our members about usage of our cards being limited by not having a chip,” he says.

For Halpern, the key reasons for moving to EMV are wider card acceptance worldwide (generating greater use, especially if members start using the UNFCU card as their main card) and fewer losses and reported incidents of suspected fraud. He says: “There will be a direct benefit for us in lowering our fraud cost, but UNFCU is about enhancing and optimizing customer service. We believe that investing in the customer is the key to our growth.”

upgrading infrastructureThe barriers to a move to EMV in the US include the need for an upgrade of infrastructure. Who will bear that cost is currently being debated. The biggest piece of infrastructure is the payment terminals, and

24

years ago and began updating our terminals then, to ensure they were EMV-compatible and to have global interoperability.”

Although banks are still trying to protect revenue streams gained from signature-debit transactions, Henry believes the forthcoming financial reform surrounding interchange fees will help put the spotlight back on the importance of card security and the need to take cost out of the system.

“Fraud is considered a component of the transaction processing cost. Issuers have passed on these costs to merchants in the form of higher interchange rates. When the payment environment becomes more secure with EMV technology, the reduced fraud rates will need to be taken into account. There will be lower fraud and lower risk.”

Walmart’s terminals are also capable of accepting contactless payments through an add-on module. However, Henry says that until the business case is made for contactless payments, Walmart will not move in that direction. It doesn’t support the arguments for moving straight to contactless payments, because they don’t bring the same global interoperability as EMV contact cards.

“We would like to get rid of the magnetic stripe altogether,” he concludes. “Moving to a global standard with contact EMV will bring this. If a contactless card did not work globally, the merchant would be forced to revert to magnetic stripe or key entry as a back-up, and that would be a backwards step.”

30%of US travelers who had problems using their magstripe cards abroad changed banks as a result

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Solutions_ EMV in the USA

Gemalto has interviewed a number of Americans who have experienced the frustration of not being able to use their bank cards abroad. Below are three extracts. To see these and other interviews in full, go to www.youtube.com/user/JustAskGemalto

Jim burke from Bandon, Oregon was one of the many people stranded in Europe during the Icelandic volcanic ash crisis. “Because the American magstripe cards do not work in automated ticket terminals in train stations, I was compelled to stand in line. In Amsterdam, that line was seven-and-a-half hours long. It was incredibly aggravating and tiring.”

On a trip to Scandinavia, Daniel Applegate from Los Angeles, California experienced similar problems paying for train tickets and restaurant meals. “Having a PIN that I enter is way more convenient than signing my name and trusting that the person checks my signature. It’s much more secure that way, and faster. It’s just better technology. As soon as I saw it, I thought: ‘Why don’t I have that?’”

nancy Elkind from Denver, Colorado had her holiday to Paris spoiled because she was unable to hire bikes from the unmanned docking stations. “We tried all of our credit cards and none of them worked. We soon realized it was because we had a magstripe and what the machines wanted was Chip and PIN.”

Travelers’ tales

there is still much uncertainty as to whether it is best to go straight to contactless EMV, or to start with standard EMV cards that require a PIN for verification. However, the recent decision by Walmart, the country’s biggest retailer, to move to EMV-compliant terminals (see panel, below) suggests that the latter will be the most popular route.

While there is likely to be a transition period where both magstripe and EMV payments are accepted, there will come a time when, as in Europe, merchants will no longer want to accept magstripe transactions because they are less secure, especially if liability for fraudulent transactions lies with them. Moreover, new financial legislation in the US will regulate, and lower, the interchange fees on debit cards, and it is thought that if merchants have to pay lower interchange fees to banks, they

could use those savings to fund new terminals.

As for contactless payments, Halpern says that, while the technology is definitely there, there are still some obstacles to be hammered out in the contracts between telecoms companies, chip makers and financial services firms.

What everyone agrees on is that the US has to look seriously at cardholder authentication. This will help to stamp out the use of counterfeit cards at the point of sale and enable a more secure means of identification for online purchases. It seems that it is not a question of if, but when, it will happen.

With 4,200 stores across the country, Walmart is the biggest retailer in the US – so its decision to roll out EMV-compliant tills is a major boost for supporters of the secure chip cards.

“There will come a time when merchants will no longer want to accept magstripe transactions because they are less secure”

The Review26

Digital technology has the capacity to bring the world together, but its benefits can be frustrated by differences in standards among nations. The Review looksat two major projects that aim to make cross-border communications easier

united nations It seems absurd that, 10 years into the

21st century, fax machines can still be an operational necessity, even for small businesses. The lack of international

standards for digital signatures and identity verification means that legal and commercial documents sent from one country to another often still require a pen-and-ink autograph, slowing down eCommerce between nations.

The good news is that two projects, both launched in 2009, are working to make cross-border communications and eCommerce more secure and straightforward.

SToRKSTORK (Secure Identity Across Borders Linked) aims to establish a European eIdentity (eID) interoperability platform to give users access to international applications using their national IDs. It is funded by the European Union (EU).

Frank Leyman, Manager of International Relations at Belgium’s FEDICT, one of the

organizations working on STORK, explains one potential benefit. “If a Belgian student wanted to enroll at Hamburg

University, for example, he would go to their website and enter his Belgian ID when prompted. The site would see that he’s not a German citizen, connect to STORK and request the form of authentication relevant to that country. STORK would then provide that authentication and the door to the application would open.

“This is a tool that’s going to allow you to do much more in the virtual world,” Leyman adds. “You will know who’s knocking at your door and, thanks to STORK, you’ll be able to verify them and do business with them.”

STORK has analyzed the unique eID infrastructures and technologies of member states in order to create an architecture that allows all the eID systems in EU countries to work together, without changing the systems already in place.

“We also had to resolve some security issues,” Leyman says. “One country may require only a user ID and a password, whereas another needs smart card or biometric confirmation. So we had to line all these up.”

They found four commonly used levels of trust that were similar enough to form cross-border standards known as the STORK quality

AuThOR TAMSIN OxFORD

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authentication assurance levels, from Level 1 (‘No or minimal assurance’) up to Level 4 (‘High assurance’). Based on these, each country now knows what level of security the others offer. But Leyman says there are still challenges ahead.

“STORK can build something that will work perfectly on a technical level, but that doesn’t mean it will solve the problem of trust. If a country is prone to identity theft or similar issues, I would have to verify someone there who claims to have Level 4 trust and make sure that their interpretation is the same as mine.”

He believes these trust issues could potentially be solved by countries talking to one another so that they can verify identities in more detail. Overall, he says he’s pleasantly surprised by the speed at which the project has progressed and how willing the states have been to work together.

Digital MercosurMercosur is a Regional Trade Agreement founded in 1991 between Argentina, Brazil, Paraguay and Uruguay. These countries are keen to foster joint policies in the area of information and communications technology (ICT) and to make it easier for people to communicate and trade across their borders. Hence the Digital Mercosur Project, launched in February 2009 and developed in conjunction with the EU. The project aims to promote entrepreneurship, eCommerce and increased skills in the ICT sector.

Gerson Rolim, Brazil’s National Coordinator for Digital Mercosur, says: “One of the project’s main

aims is to achieve mutual recognition of digital certificates. For example, when you issue a digital certificate in Italy, then this will be recognized by France or Germany, and so on.

“We want to achieve the same thing by resolving issues in our public infrastructure so as to be able to use interoperable eSignatures and eID across borders.” These issues include a free market zone to leverage cross-border commerce, with a single authority to control it; developing mutual digital certification so that everybody agrees on security; and developing a basic infrastructure that all four countries approve.

“It’s technically easy to establish trusted relations with each other and create a unifier such as cross-border certification,” Rolim explains. “But one of the main drivers of the Mercosur Bloc was that we could not build original or supranational certification, because we couldn’t be sure that national levels of security would be maintained.”

One of the biggest challenges Digital Mercosur faces is getting everyone to agree on how to move forward. Because the individual countries have already made progress on their own, but in different directions, Rolim describes this as “fixing an airplane mid-flight”.

“This is a very new technical approach,” he adds. “But we think that additional certification that is recognized in all countries can be one of the most important tools to improve transactions and encourage cross-border eCommerce.”

Both projects face similar challenges. Ensuring that cross-border communications respect cultural differences, manage legacy systems and meet all the necessary levels of security is a tricky undertaking. But both the EU and Mercosur are well on the way to demolishing the digital frontiers that hold back true international communication and eCommerce.

“We want to be able to use interoperable eSignatures and eID across borders”

“STORK is a tool that’s going to allow you to do much more in the virtual world”

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28 The Review

Statistics from the digital world

Global snapshot15%A survey of 36,000 US consumers found that 96% own a mobile device and 15% have used it to make purchases. More than 60% said it was ‘very important’ or ‘important’ to be able to use their phone to check a product’s availability at a particular store, and nearly 25% use it to compare prices while in a store. Source: www.finextra.com

US$5.2 billionIn 2009, the value of mobile payment

transactions in the US was US$5.2 billion, according to a new report. This represents 6% of the total global value of such transactions. The report predicts that the market for NFC mobile payments in the US will grow rapidly, reaching US$56.7 billion in 2015.

Source: www.mobile-financial.com

1 in 692 Seven of the 10 safest nations in which to surf the internet are in Africa,

according to a recent study that analyzed virus and malware attacks picked up by security software and listed them by country. Sierra Leone was the

safest, with an average incident rate of one attack for every 692 web surfers.Source: www.pcworld.com

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15 millionSubscriptions to iD, NTT Docomo’s platform for using postpaid electronic money with Docomo handsets and compatible credit cards, have passed the 15 million mark. There are now 481,000 iD-enabled terminals in Japan that allow users to make payments by waving cellphones or cards over them. Source: www.nttdocomo.com

€130In 2008, the use of cash in Europe cost the equivalent of €130 per person. The total cost of distributing, managing, handling, processing and recycling cash, and of accepting cash payments, was €84 billion. Despite continued growth in the volume of cashless payments, cash will still be the main retail payment method in 2014, say analysts at Retail Banking Research.Source: www.europeanpaymentscouncil.eu

In early 2011, smart cards to pay fares across a range of public transportation services in Dublin will become available. The €55 million integrated ticketing project will cover the city’s key bus and train services by the end of the year. The cards are expected to be used by 250,000 people. Source: www.irishtimes.com

35%Electronic payments are likely to account for about 35% of all transactions in India in the next five years, according to industry estimates. The increasing use of mobile transactions and those using interactive voice response (IVR) technology is likely to account for much of the expected growth.Source: www.deccanherald.com

€55m

43.9 millionA report from the ITU has revealed that 43.9 million Nigerians have internet access, giving it the largest internet population in Africa. Approximately 39.6% of all the continent’s internet traffic originates from Nigeria.Source: www.itnewsafrica.com

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30 The Review

We won’t see any earth-shattering changes in the next 12 months,” says Magnus Lindkvist. “But we can be certain that in 30 years,

current technologies, ways of living and everything else that is used and ubiquitous in our times will most definitely be replaced.”

Lindkvist is a futurologist and lecturer on business intelligence and trends, the founder of the Stockholm-based consultancy firm Pattern Recognition and the author of the book Everything We Know Is Wrong: The Trendspotter’s Handbook. The main trend he sees influencing modern life is a shift in the balance between humankind and technology.

“Until 10 years ago, we set the agenda,” he explains. “We had an idea and then had to wait for technology to catch up. Now it’s the opposite; technology is so advanced that it’s waiting for us to change our ways of thinking and planning.

“Most business models would look drastically different if they had been started today. This doesn’t mean that everything these industries are doing is wrong, but most of their heritage was built in a time before internet connectivity.”

Social trendsLindkvist expects two current social trends, largely powered by the internet and social media, to influence technological innovations in the coming years. We are moving from a society in which an elite group produces content to one in which everyone does, be it media, products or services; and from a society with top-down power to one where power also moves from the bottom up. The net result is

Trends_ Futurology

AuThOR ANNA LAGERKVIST

Trendspotter Magnus Lindkvist explains how technological advances, and social shifts that are closely linked to those advances, are changing the world around us

The democracy of technology

that everyone has the opportunity to affect everything: influence is no longer the preserve of the powerful few or the technically competent. For evidence, we need look no further than the WikiLeaks scandals earlier this year involving the US armed forces.

Thus, our world is now characterized by experimental business models challenging current ways of doing things. “For instance, thanks to new financial systems such as Square and WePay, it’s easier for strangers to work together, sending money and information between countries. These are simple technological innovations applied in a new, more efficient way,” says Lindkvist.

Technology can be likened to Darwinism, he argues. Many products and services are launched, but most fail because of the wrong timing, pricing, focus and so on. Only those innovations that are adaptable to our needs, and to different generations and cultures, survive. And it is only when technology becomes sufficiently cheap, stable and ubiquitous that it becomes an everyday utility. To give just one example, he points out that the internet had been around for all of 30 years before the World Wide Web was created.

The invisible webTalking of the web, Lindkvist predicts that the next generation of the internet will be invisible. He explains that, although we will use more and more computing power, we will actually see less and less of it as machines create an increasing proportion of the information in the world. The invisible web runs on gadget-to-gadget connectivity; cars

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“Thanks to new financial systems such as Square and WePay, it’s easier for strangers to work together”

connect to the internet, as do ovens, toilets, cellphones and fridges, all of them constantly communicating and updating.

Invisible technology will also improve our health and quality of life in the form of transhumanism – the use of technology in humans. “We’ll start seeing nanotechnology-based surveillance systems in our bodies,” he explains. “This could be in the shape of bots that travel around our bodies to make sure everything is working as it should – alerting us the moment any cancerous cells develop, for example.”

Making security coolLindkvist believes three forces are currently shaping the world of digital security. The first is the ability to stream and scan massive amounts of information in real time, which enables us to calculate outcomes faster than before. “Wired magazine has even predicted the end of science itself, since we’ll be able to go straight from hypothesis formulation to conclusion, with the data crunching and simulation being run in a few milliseconds,” he says.

The second is the rampant experimentalism

made possible by the web, where small start-ups can compete head-on with large firms that have previously dominated the market. As he points out, “the former win surprisingly often. For instance, it wasn’t Visa or MasterCard that created the online peer-to-peer payment standard, but PayPal. Now we’re seeing a fight over standards for payment modes, transaction security and so on. The winners might be Google or Apple, but they might equally well be some as yet unheard-of start-up.”

The third is global integration. “We are only a decade into exploring what true global interconnection actually means, whether it’s in the formulation of laws, or just new interpretations of what it means when the stock market collapses,” he says. He adds that one consequence of this global interconnection is that governments need to work together to create global legislation that can regulate it without impeding it.

Above all, to meet the challenges of this changing landscape, Lindkvist would like to see “a shift in the way we consider security”, a shift he characterizes as moving from the ‘Orwellian’ to the ‘Huxleyan’. “The technology in George Orwell’s novel 1984 is intrusive, coercive and turns people into slaves,” he explains. “But in Aldous Huxley’s Brave New World, technology feels so good that people want more and more of it. So how can we make people covet security? How can we make it cool and fun?

“Twenty years ago, these were ridiculous claims to make about a telephone, yet here we are in the age of the iPhone,” he points out. “I want to see security and card transactions take a similar route.”

30years after the internet began, the World Wide Web was created

>>32 The Review

innovation_ Creativity

How do you foster a culture of innovation within a business, and how do you tell a good idea from a bad one? The Review investigates the art of creativity

AuTHoR WENDy M GROSSMAN

illuSTRATion ANGELA LyONS

The most common question anyone ever asks writers is ‘Where do you get your ideas?’ Some authors resent the implication that there is a pot

of ideas somewhere that anyone could exploit successfully, if only someone would disclose its secret location. The reality is, as British author Douglas Adams wrote in the introduction to the collected radio scripts for The Hitchhiker’s Guide to the Galaxy, that “an idea is only an idea”. A whole script is “hundreds of ideas”, all of which have to be painfully invented.

Companies have the same problem. What is creativity, and how do you go about fostering it? Adams’ own answer is applicable to many types of situation: “The way you get really good ideas is by working with talented people you have fun with.”

“You can debate whether creativity can be codified and taught,” says John Shen, who runs the four-year-old Nokia Research Center in Palo Alto, California. Based on his previous experiences working at Intel and teaching at Carnegie Mellon University in Pennsylvania, he says: “My personal view is no, it can’t be taught

and you can’t systematize it.” But, he adds, “I see it as my job to create an environment that can foster greater creativity.”

Random connectionsIn Shen’s view, a key element is to allow innovative ideas to emerge from the bottom up. “Creativity comes mainly from making seemingly random connections,” he says, “so it’s much more of a serendipitous process than a regimented one, and we need to create an environment that allows and even encourages serendipity.”

This involves recruiting people with diverse backgrounds who are well read on many topics, and assembling them into even more diverse teams. “The connections seem random, but as you take them further, you discover that they’re meaningful and profound,” says Shen. “That’s where I think creativity happens.”

US science author Steven Johnson’s new book, Where Good Ideas Come From: The Natural History of Innovation, codifies the benefits of this approach. Most great ideas, he writes, first emerge half-baked and incomplete.

Liquid networks – those with enough population density to have many inputs, but open enough to allow information to flow – allow partial ideas to meet and complete one another. Ideas, he writes, need to collide.

Execution is keyCompanies sometimes struggle to exploit the ideas that emerge from their research divisions. In another new book, The Other Side

solutionsCreative

15%Gemalto’s engineers are encouraged to spend 15% of their time at work thinking about new ideas

John Shen (Nokia), Ari Juels (RSA) and Tan Teck Lee (Gemalto) share their views on creativity with us

John Shen

Ari Juels

Tan Teck lee

iiiiii Slug_ Slug iiiiii

33 www.gemalto.com

“Creativity comes from making seemingly random connections”

More than 1,000 engineers work at Gemalto’s R&D center, where they are encouraged to focus on solving day-to-day problems.

34

of Innovation: Solving the Execution Challenge,Vijay Govindarajan and Chris Trimble blame the mismatch between innovation, which is inherently non-routine and uncertain, and companies’ operational needs for the repeatable and predictable. Execution, they argue, is the key.

You can see their point: all three of the great 20th-century corporate research labs

– AT&T’s Bell Laboratories, IBM’s Watson Research Center and Xerox’s PARC – provide

examples. AT&T, banned by an antitrust settlement from entering the computer business, gave away both the UNIX operating system and the C programming language to universities. Xerox saw no market for its pioneering graphical, mouse-driven personal computer – until Steve Jobs famously copied it at Apple. And by the late 1980s, IBM – famous for inventing DRAM, disk drives, the programming language Fortran and much more – was failing at technology transfer. In the 1990s, as Director of IBM’s research division, James McGroddy began the effort to reverse this trend.

“Our goal has two legs,” he said in 1991.“One is to be famous for our science, and the other is to be a vital part of IBM, and that really means vital, like the heart that keeps you alive.” In order to work, he added, “it’s got to be tangled in”.

Ari Juels, Chief Scientist and Director of RSA Laboratories, cites a personal example to show how many factors have to go right for an idea to succeed. While reading David Kahn’s book The

Codebreakers, Juels was struck by the possibilities of deploying techniques used by telegraphers in the Allied underground in World War Two in one of RSA’s products.

“But [because of] timing, the personalities I interacted

with, and perhaps my lack of salesmanship, I couldn’t get it adopted,” he says. “Then, 10 years later, a need was found in that same product for exactly this type of technology.” Of course, in 10 years the idea could easily have been forgotten, or Juels could have moved on. “The suitability of the idea was a function not just of the technological environment in which it was to be deployed, but of many external business factors as well.”

Missed opportunitiesJuels goes on to raise a point that many experts in innovation agree on: the processes by which

The Review

“Liquid networks – those with enough population density to have many inputs, but open enough to allow information to flow – allow partial ideas to meet and complete one another”

>

35 www.gemalto.com

innovation_ Creativity

grants are awarded and papers are accepted for technical journals tend to filter out ‘outliers’ – those ideas that deviate from the norm.

“That can be good – many crankish papers are submitted to journals and conferences – but it can also be bad, in that there are many missed opportunities,” he says. “There are endless stories about brilliant papers being rejected multiple times before they finally appeared.”

Like Shen, Juels takes a bottom-up approach: “The researchers in the lab are self-motivated, driven and creative. I don’t have to tell them what to do, but I am responsible for exerting an overall shape on the research program and promoting it to the rest of the company.”

For him, the keys to fostering creativity are treating the scientists in the lab as colleagues rather than as staff, giving them a fair degree of autonomy and picking the right personalities. “Many research scientists are concerned primarily about status in the academic community, and that desire can often be at odds with the skills, temperament and investment of time it can take to transfer technology to the company.”

The middle groundAs Chief Innovation and Technology Officer for Gemalto, Tan Teck Lee handles this same issue by asking his teams to focus on both “current and adjacent businesses”.

Tan’s group of 1,000 engineers focuses on R&D ideas that will have a direct impact on the business. This means exploring relatively new opportunities in areas such as healthcare or machine-to-machine security, besides those sectors in which Gemalto is already active. Tan handles the challenge of having such a large number of engineers by assembling small working groups to look for new opportunities.

“Any group bigger than 10 stifles the brainstorming and idea generation process,” he says. Engineers are also encouraged to spend 15% of their time away from their regular work to think of new ideas: “We try to give them the opportunity to think out of the box.”

A key element of this is a company program to help the engineers develop. “We always make it clear to them: don’t focus on technology for the sake of technology,” says Tan. “We often see ideas that fail because they’re too far ahead of their time.” Instead, he tells them to “focus on a day-to-day problem to solve, because then you will use good technology and ideas to come up with a novel approach”.

Tan’s focus on business relevance brings out another common issue: all corporate research labs struggle with finding the middle ground between blue-sky research and simply carrying out product development. Nokia’s Shen says:

The road to success is paved with failures. Here are five innovations that fell through the cracks

“It’s important to us, when we have this pull in two different directions, that it creates tension, and that we view that tension as not necessarily bad or something to get rid of, but embrace it. That the tension exists indicates that this lab is doing the right thing.”

So Shen’s lab isn’t completely undirected. “The entire lab is very aware of where the company is headed in terms of overall strategy,” he says. “Beyond that, we allow them to decide what they think would be interesting to work on.” Part of what makes this approach successful, he says, is creating a culture where stopping a project isn’t seen as an embarrassing failure.

And who knows, one day that failure may be rediscovered. As Aravind Joshi, a professor at the University of Pennsylvania, told pen computing pioneer Jerry Kaplan in 1979: “Your ideas will go further if you don’t insist on going with them.”

bubble memory (ibM, 1972)As late as the 1990s, IBM researchers still loved bubble memory, which (unlike semiconductors) retained its information when the power was turned off and (unlike hard drives) had no moving parts. But development proceeded too slowly to compete with rapidly improving existing technologies.

Xerox Alto (Xerox, 1973)This early PC had a mouse-driven WySIWyG graphical interface, built-in ethernet networking, even the beginnings of PostScript… and it never made a cent for xerox, which failed to capitalize on any of the Alto’s many inventions, all of which became billion-dollar industries. The innovation and creativity were there; what failed was the company’s ability to appreciate what it had and how it could be exploited.

concorde (Aérospatiale and bAc, 1976)It was beautiful, universally admired and able to fly from London to New york in three hours – but Concorde’s high running costs made it too expensive for the mass market. The last planes were retired in 2003.

pen computing (go corporation, 1987-1994)Jerry Kaplan’s GO Corporation wrote the pen-based operating system used by AT&T for the EO Personal Communicator. It was everything the iPad isn’t – big, heavy and clunky – and its handwriting recognition system required you to print each letter in a separate box. A combination of design, timing, financing and enemies doomed the venture. But as recently as 2008, the gesture features of the Windows Tablet were found to infringe on one of GO’s patents (now owned by Alcatel-Lucent).

google Wave (google, 2009)Somehow, no one ever figured out what Google’s attempt to combine email, instant messaging, whiteboards, social networking and online discussion was really good for. The company pulled the plug after a year.

27years after Concorde’s first commercial flight, the last planes were retired

36 The Review

news

In brief

Gemalto’s Smart Guardian FIPS, a smart card based encrypted USB drive, received the Outstanding Innovation in Security Technology Award at the Smart Card Alliance 2010 Annual Conference in Arizona, USA. “To be the first recipient of this award from the Alliance is a great achievement for us, and a testament to the way Gemalto solves real-world security challenges,” says Paul Beverly, President of Gemalto North America.

The latest Canadian bank to migrate from magnetic stripe banking cards to EMV is Home Trust Company, which focuses on consumers who don’t meet the lending criteria of traditional financial institutions. Gemalto is providing it with microprocessor payment cards, as well as data preparation, card personalization and fulfillment services. It is also giving guidance on interacting with other members of the payments ecosystem to meet Canadian EMV requirements.

An award for innovation

Help for Home Trust

Eureka!

It’s personal

Instant artwork in Mexico

A sleek smart card readerGemalto’s new Prox-DU is a versatile smart card reader that is suitable for a host of applications using both contactless and contact technologies. The lightweight reader is ‘plug and play’ on all the major operating systems; simply connect the device to a USB port and it’s ready to use. Typical applications include giving secure access to buildings and authenticating computer users, and it meets international standards for use in the healthcare sector and in the identity and access control markets for both public and private organizations.

Gemalto has won the EUREKA 2010 Innovation Award for its MEDEA+ ONOM@TOPIC+ project. The award, given for outstanding R&D projects in Europe, recognizes Gemalto’s work on secure interoperable eGovernment services and advanced mobile solutions – innovations that have created tangible benefits for service providers and end-users alike. At the heart of the project were advanced prototypes for a new generation of eID cards and SIM devices. Gemalto CEO Olivier Piou says: “This award is an endorsement of our capacity to bring trust and convenience to the digital and wireless world.”

One way to make official identity documents more secure is to personalize them, and that’s what the latest additions to Gemalto’s Sealys range of products do. The advanced security features are designed to counter forgery by applying complex laser engraving techniques to the polycarbonate bodies of documents such as ID cards, healthcare cards and driver’s licenses. For example, Sealys CoreMark is a semi-transparent window within the polycarbonate card body that gives a watermark effect, so that verifying the card is as simple as checking a banknote.

Banco del Bajio has chosen to use Gemalto’s Allynis Instant Artwork solution. This will enable the Mexican bank to order small quantities of smart payment cards with the artwork of their choice. Manuel Duvignau López Portillo of Banco del Bajio says: “Gemalto’s solution helps us handle customized artwork and demand for smaller batches, reinforcing our competitiveness in the market.”

north and South America

37 www.gemalto.com

Asia and oceania

Thailand is the latest Asian country to embrace the benefits of Near-Field Communication (NFC) technology – with help from Gemalto. Along with Kasikornbank, the country’s second largest bank, and Advanced Info Services (AIS), its largest telecoms operator, Gemalto is enabling Thai consumers to transform their mobile phones into contactless payment devices. It is providing its Trusted Services Manager product to operate the secure over-the-air personalization that gives mobile subscribers access to NFC payments and AIS services.

Consumers in Tunisia can now open a bank account and leave the branch with their new payment card in their hand, ready to be used. zitouna Bank has deployed Gemalto’s Dexxis Instant Issuance solution so that it can offer on-the-spot EMV card personalization in all its branches. zitouna was only launched in 2009, and the introduction of instant card issuance is part of its marketing strategy to differentiate it from its more established competitors.

nfc comes to Thailand

Zitouna offers something different

Japan is the world’s most advanced mobile contactless market, with 18% of mobile subscribers actively using such services. Now leading Japanese mobile telecoms firm KDDI is running a trial of a new-generation Near-Field Communication (NFC) program, with help from Gemalto. Participants in this pilot, which ends in December, can experience various kinds of NFC service, including mobile payments, eTicketing and downloading information from smart posters. Gemalto’s role is to prepare and manage sensitive user information between KDDI and other service providers, as well as providing multiple mobile applications to subscribers.

Morocco is the first country outside the European Union to issue new-generation biometric passports that include Extended Access Control, in accordance with European specifications. Gemalto is supplying the passports over a three-year period that started in December 2009. It is providing a complete end-to-end solution, from the technology needed to gather citizens’ data securely and efficiently, to training and maintenance.

Japan pilots new-generation NFC

Morocco moves ahead 100,000The number of Postcard GoGreen cards Deutsche Post DHL has issued to its enterprise customers in Germany since June. Postcard GoGreen, the world’s first bio-sourced payment card, is supplied by Gemalto. It’s made from a renewable material – derived from corn, sugar cane and potato starch – that is easy to recycle and compost and reduces the ecological footprint of the production process. Businesses use the cards to pay to mail letters and packages, and for express deliveries.

10 million The number of eDriver’s Licenses Gemalto has delivered for use in India. The secure documents help to protect citizens against identify theft and contain information about the driver’s history that is expected to help reduce car accidents. With at least 110 million drivers in a population of 1.15 billion, there is the potential for plenty more licenses to be delivered in the years to come.

Europe and Africa

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38 The Review

Digital lives_ Jean Hoerni

AuThOR LUKE EDWARDS

IlluSTRATION ILIKETODRAWTHINGS

Swiss physicist Jean Hoerni left two very different legacies, both of which have transformed people’s lives

Microchips and mountaintops

In 1959, Dr Jean Hoerni demonstrated the first working planar transistor – one of the key building blocks of today’s Silicon Valley. But when he died in 1997, he left an equally important legacy in central Asia, where his endowments have helped to educate thousands of poor children in remote mountain regions.

Born in Switzerland in 1924, Hoerni received PhDs in physics from Cambridge University and the University of Geneva before moving to the United States in 1952. It was while working as a research fellow at the California Institute of Technology in Pasadena that he caught the attention of the ‘father of transistors’, Nobel prize winner William Shockley, who asked Hoerni to work for him at his newly founded Shockley Semiconductor Laboratory.

In 1957, Shockley’s strange behavior and obsession with being goal-focused rather than research-driven led to eight of his employees leaving,

including Hoerni. Dubbed ‘the Traitorous Eight’, they founded Fairchild Semiconductor. (Two of this group, Robert Noyce and Gordon Moore, later went on to set up Intel.) Fairchild aimed to facilitate mass production of silicon transistors, which had proven impossible for Shockley to achieve.

One day early in 1959, while taking a shower, Hoerni was inspired to create the ‘planar’ process (named after the flat topography of the finished device), which used oxidation and heat diffusion to insulatea silicon transistor. A silicon dioxide layer flattens the chip and seals the unit, protecting junctions and making it an ideal surface for adding layers of electrical elements, such as transistors.

In the planar process, a silicon wafer is repeatedly coated with silicon oxide and precisely engraved so that the components of a transistor can be deposited in interconnected layers on the surface. This method solved the reliability issues that had plagued

Fairchild Semiconductor’s previously state-of-the-art ‘mesa’ transistors, and the manufacture of today’s modern integrated circuits still relies on it. One historian has called it “the most important innovation in the history of the semiconductor industry”.

In 1961, Hoerni, together with fellow Traitorous Eight members Jay Last and Sheldon Roberts, set up Amelco Semiconductor (now part of Teledyne). Further business ventures included Union Carbide Electronics in 1964 and Intersil (the company that went on to pioneer digital watches) three years later.

But Hoerni was no workaholic. He had a hobby: high-altitude hiking. In particular, he often visited the Karakoram mountains in Pakistan, where, as his business partner Jay Last pointed out, he could exercise his “incredible stamina, going for hours on barely any food or water”.

It was on one such mountain expedition that Hoerni was moved by the extreme poverty of the Balti people. Years earlier, an American, Greg Mortenson, after getting lost hiking in the Karakoram and nearly dying of

exhaustion, had been taken in by the villagers of Korphe, who saved his life.

While recovering, he noticed children doing math in the dirt with sticks, and pledged to raise funds to help them pay the local teaching fee of US$1 a day.

Hoerni contributed a huge (at the time) US$12,000 to Mortenson’s subsequent school building project, but this was just the start of his contribution. He went on to found the Central Asia Institute (CAI), a non-profit organization dedicated to promoting education and literacy, especially for girls, in remote regions of Afghanistan and Pakistan. Hoerni appointed Mortenson as Executive Director, and his generous endowment of US$1 million secured the CAI’s long-term future.

Hoerni died on 12 January, 1997 in Seattle, aged 72, but his legacy lives on – not just in the multibillion-dollar semiconductor industry, but in the remote mountains of central Asia, where the CAI has been responsible for building 131 schools and educating more than 58,000 children to date.

“One historian called the planar process ‘the most important innovation in the history of the semiconductor industry’”

Revıewthe

Autumn 2010

Ancient and modernHow Turkey became a world leader in digital innovation

The art of innovation

EMV banking cards – coming to America?

How technology is changing our world

Security for cloud computing

The internet of things