What the hell do smart cards do?
The short answer: not a whole lot...yet. There's a lot of potential power there, though, and not necessarily for the consumer. This is something to watch closely, boys & girls...
Amex is the first major company to make use of "smart card" technology, i.e. credit cards with embedded chips. The stated purpose of the chip is to provide secure authentication for online purchases. VISA is also developing smart card options.
"For starters, Blue was the first chip card-a card that incorporates a silicon chip to store more information or applications than a conventional magnetic stripe-to ever be rolled out to U.S. consumers nationwide.
The chip initially included a digital certificate, an electronic key to uniquely identify the user. When used with a personal identification number code and American Express' Online Wallet software, the chip-based certificate provides two-factor authentication for cardholders. (In other words, consumers can identify themselves to online merchants by what they have-the digital certificate-as well as what they know, their card number and PIN.) But this is just the tip of the technological iceberg; the chip runs a multi-application operating system, so it can be expanded in the future to include other information and run other applications-for example, a purse that could hold loyalty reward points or stored value, or record a customer's purchase data. "
What's interesting is that this is a direct move by Amex & Sun to take away some of Microsoft's Passport authentication technology market (although they say not). From CNET(December):
"American Express joined the Liberty Alliance Project on Wednesday,
boosting Sun Microsystems' effort to counterbalance Microsoft's Passport
Some stuff they're planning to make it do in the future:
Some interesting articles on security and smart cards: