Hypercom Introduces Low-Cost Chip Card For Customer Loyalty and Credit Card Applications

Business Wire, Feb 18, 1997

PHOENIX--(BUSINESS WIRE)--Feb. 18, 1997--

Low-Cost Chip Card Establishes Viable Pricing Model

Hypercom Also Launches New Low-Cost Card Reader

Hypercom, Inc., the fastest-growing global supplier of POS technology, today introduced a low-cost chip card that cost-effectively reduces credit card fraud while serving as a platform for card-based customer loyalty applications.

Overcoming a major obstacle to the advancement of chip card technology, Hypercom's ChipStripe costs less than $1 apiece for 500,000 pieces. To create this viable cost structure, Hypercom used innovations in architecture and security features.

"ChipStripe advances traditional credit card technology," comments George Wallner, Hypercom's head of technology. "Most credit cards still rely on the magnetic stripe, which is easily damaged, has no built-in security and does not support value-added applications such as loyalty programs. With ChipStripe, customers can begin to take advantage of the benefits of chip card technology at a low cost."

Targeted Market

Wallner says ChipStripe represents a low-cost alternative to magnetic stripe technology in credit, debit and loyalty applications. "This product is not intended to compete with Mondex or Visa Cash," he explains. "ChipStripe enhances existing payment products (credit and debit) and lets companies gain a competitive advantage by easily launching secure customer loyalty programs. It is not designed to support an open stored value system or to replace multi-function microcontroller cards."

Hypercom's President and CEO Al Irato adds, "We're addressing stored value as a separate market. ChipStripe responds to customer requests for a cost-effective chip card technology that suits their needs right now. Their most pressing concerns for chip technology involve credit card and loyalty programs which don't need a lot of memory or complex security systems. For these applications, customers don't want to spend a lot of money on multi-function chip technologies, such as EMV."

New, Affordable Cost-Structure

"Cost is the key issue with chip cards today," Irato says. "Card issuers are used to working with magnetic stripe cards, which typically cost $0.35 each. Until now, the typical price model for cards based on chip technology was $4-$6 each. Hypercom's ChipStripe is implemented on a cost-efficient chip along the lines of EMV and Easy Entry with security and loyalty functions added. Using this chip, we are able to bring the cost of the card to under $1."

Explaining how ChipStripe can advance chip card usage in the U.S., Irato adds, "Success depends on costs being lower than the revenues the card can generate. Stored value and multi-function cards are significant developments for the future of the banking industry. In the meantime, banks have continued to focus on credit cards, which are proven and have achieved customer acceptance. We're trying to bring the costs down to create a good business case for chip cards."

New Card Reader

In conjunction with the introduction of ChipStripe, Hypercom is launching a low-cost chip card reader that can be added as an upgrade to existing Hypercom terminals. "The new IC card reader can read any ISO 7816 compatible card, including EMV," says Wallner. The new reader, the ICR-2, will sell for under $50, and can be added in the field to any Hypercom terminal manufactured since 1989. It can be easily installed by merchants. "ChipStripe makes it easy for card issuers to begin using chip technology to add security and now functionality to existing payment products without making costly, complicated overhauls or upgrades," says Wallner.

How It Works

ChipStripe uses a hardwired chip with 128 bytes of memory. ISO 7816-3 compatible, the chip securely stores the Track 1 and Track 2 data, incorporates a highly secure online card authentication system, and has 16 bytes of read/write storage for simple loyalty applications. Security is based on a powerful cryptographic algorithm called KEELOQ (TM) Microchip Technology, Inc.) which has found wide use in keyless entry control applications. Unlike DES or RSA, KEELOQ can be easily implemented in silicon, eliminating the need for a costly microcontroller.

Hypercom will offer ChipStripe in either a micro-module format or embedded in a card. An accompanying card initialization system is compatible with existing magnetic card initialization systems.

Hypercom provides server software that allows ChipStripe to be added to any existing credit or debit transaction processing system without making changes to the host. The ChipStripe Security Server is a multi-tier server that is platform- and database-independent and performs all functions related to online card authentication with no noticeable impact on transaction response times. Loyalty applications are supported by Hypercom's Token Tracking Server, completing a comprehensive turnkey loyalty solution.

Hypercom Inc.

Headquartered in Phoenix, Arizona, Hypercom Inc. engineers and manufactures technology solutions that are transforming the automated transaction processing industry. Hypercom delivers total solutions that maximize and extend the value of investments in point of sale technology. Products are sold in 50 countries and by 65 global distributors.