Smart-cards - a key tool for utilities

Until a few years ago – before deregulation hit the energy sector – end-consumers were limited to just one or two suppliers for all their energy needs. These suppliers in turn purchased virtually all their metering equipment from manufacturers who simply needed a factory in which to produce the equipment. In fact, their entire operating strategy was based almost exclusively on the production time-scales necessary to meet market demand. This is all changing fast. Consumers are demanding more and better services from their energy suppliers, competitive pressures are forcing utilities to rethink their business, and utility suppliers are being asked to come up with more innovative and ‘smarter’ products.

These new market conditions are one of the reasons that ETIS (an independent solutions provider) and Schlumberger are working together on a range of energy prepayment systems employing smart-card technology. Between them, these two companies are able to provide utilities with a wide spectrum of services, ranging from consulting to the implementation of complete energy management solutions.

Smart cards provide a key brand imaging tool

Now that deregulation is taking hold, consumers are being overwhelmed with offers of supply from utilities, and they have the power to make the choice. Since customers find it almost impossible to read through all the contracts and options in order to decide which deal is best for them, they are increasingly basing their decisions on trust and confidence. Brand image is all-important.

Because customers are analysing the brands available, utilities must increase the value of their offerings, and increase the number of services they provide, in order to retain and ‘own’ customers. At this point, customers prefer to come to the utility for additional services. They will chose one channel of supply for their energy requirements, and for new services. Consequently, the brand becomes the offer base, and the additional services deliver a full brand solution.

Many utilities view smart-card solutions as an ideal means of accommodating the rapid business changes that deregulation is forcing upon them, especially with regard to energy prepayment. However, smart-cards are much more than a means of handling prepayment – they are a key tool that utilities can use to strengthen the link between their customers and their brand image.

Typical electronic transaction system using magnetic stripe tokens, indicating the relative levels of processing required

These are, however, only the business implications from the use of the technology. One also needs to look at the technologies that are available, and how flexible they are in meeting the needs of today’s utilities.

The architecture of a typical electronic transaction system comprises four levels: the system and database, network, terminals, and tokens. When using a magnetic stripe token, most of the processing and security takes place at the system level, as shown in Figure 2. This reflects the ‘smartness’ of the complete electronic transaction system.

An electronic transaction system using smart cards significantly reduces the amount of system-level processing

When using a smart-card as a token, the overall ‘smartness’ of the system remains the same, but the organisation of the solution is different and the amount of system-level processing is much less, as shown in Figure 3.

This change decreases the importance of the central management system and database, and allows for offline secure transactions. Prepayment applications were previously targeted at ‘average users’, but since deregulation they have been aimed at the more affluent in society, providing new solutions through the same infrastructure.

With previous generations of architecture, any additional applications required modifications at the system level, which were costly, difficult to manage and time-consuming to implement. A smart-card infrastructure enables many of these changes to be made on the token, allowing an easy transition for pilot tests and trials.

An electronic transaction system using magnetic stripe tokens typically only feature system-level communication links

In the deregulated marketplace, the implications for open and closed systems are also important. Many utilities are now merging and joining forces, which can impact significantly on the way these systems communicate with each other. With typical magnetic card systems, the main interface is at the system level. This can be technically difficult to achieve – and if utilities are only ‘partners’ for the markets, then a resistance to sharing this data may also be a problem which needs to be addressed.

These issues can be resolved by using the smart-card, as shown in Figure 5. Proprietary data is still secure at the system level, but the use of the database within the smart-card means that certain data can easily be passed between the two systems. This also provides a pathway for brand expansion into other services that were previously impossible to implement.

Smart cards can provide an information pathway between systems

Of course, many utilities also express concern about the security of the data that the smart-card holds. In fact, because of the flexibility of the smart-card, security features can be added as new threats emerge. And unlike security placed at the system level, changes are easy to manage and incorporate.

Let us now focus on the potential real benefits to utility businesses throughout the world. Prepayment systems for electricity and gas are already fairly commonplace, but until recently have mainly been targeted at poor payers. 

Utilities now have the opportunity to market themselves again, in the brave new world of e-commerce. The smart-card provides an infrastructure that allows many changes and updates to the meter, and facilitates the implementation of new facilities and features. Indeed, many examples already exist where utilities are using separate payment terminals, and linking them with existing systems. This allows customers access to prepayment for utility services, and also a link to other functions such as banking systems and parking systems.

Smart card based electronic transaction systems provide a high-level of security

More and more utilities are either making alliances with other utilities or co-branding with third-party providers – all of which increases the need for a more flexible approach to a solution. Smart-cards as the token for prepayment will allow adventurous utilities to make this leap forward. 

The smart-card, as part of a flexible prepayment solution, can provide utilities with a unique marketing tool for their future development, as deregulation continues to gather speed around the globe.