Competence Network
for Applied Research in Electronic Commerce
SmartPay – Smartcards for Advanced Internet Payment Schemes
SPP ICS ElCom project 5003-054554
see also MicPay and MacPay project

The idea of paying for goods and services electronically is not new. All around in daily live we see evidence of transactions taking place where at least a part of the process is electronically executed. Since the late 70s and early 80s a variety of schemes have been proposed to allow payment to be effected across a computer network. Few of those schemes got beyond the design stage since there were little use to those who were not connected to a network. The arrival of the Internet has removed this obstacle in progress. This network of networks has grown dramatically from its inception in the late 70s to today’s global medium. By the beginning of 1997 the number of machines hooked up to the network had grown to more than 16 million. If each host computer is used by 10 individuals this means that there are 160 million people around the world who have access to services on the Internet. Much of this growth had been driven by the availability of World Wide Web technology that allows information located on machines around the world to be accessed as a single multimedia linked document with simple point-and-click interactions.

Goods and services began being traded on the Internet without the use of any supporting technology. Consumers could select goods using WWW-based catalogues and when the payment phase of the transaction was reached a variety of ad-hoc mechanism were used. These ranged from sending unencrypted credit card numbers across the network to the use of telephone or fax to transfer sensitive payment information. Unfortunately traditional payment systems, such as cash, credit cards and transfer of funds at point of sale are insufficient as payment mechanisms in this new environment because of security problems or the inefficiency of the system and the related high costs of transactions.

To solve these problems, new payment systems are being tailored for the new requirements. The results are new forms of existing payment mechanisms, as well as completely innovative systems. At the same time these payment systems for the future Internet commerce being developed and tested, financial institutions, technology companies and telecommunication providers are developing and testing systems to take over the last consumer payment mechanism that is still in the hand of the central banks: the cash market. Smart card based payment systems, currently being tested world-wide provide transaction costs low enough to be used for any purchase that is currently done for cash. What is more, the technology used for such smart card based systems is not fundamentally different from what is used in solutions for the global networks. That means that these cash replacement systems will merge with the new Internet payment mechanisms just as television will merge with other forms of information and communication transmissions.

The aim of the SmartPay project is the development of payment mechanism that fit for normal payments as well as Internet payments. To satisfy both demands, it is obvious that the resulting scheme will use off-line authorisation for the payments, as otherwise it couldn’t be used efficiently at kiosks or inside taxis, which don’t necessarily have any online connection to their bank for each transfer.

To allow the users high flexibility during their payments, the Smart card used in the project will not only support one payment mechanism, like an electronic purse card (e.g. the CashCard in Switzerland), but will support a whole fan of mechanisms. Besides electronic purse payments, our solution will be prepared to support very low value payments, the so called Micro-payments, where the transaction and processing costs are likely to be higher than the value of the money transferred. Secondly, for high value payments, it is not convenient for the user to have this amount of money loaded on his smartcard, as in the case of loss, theft or malfunctioning of the card, the money might be lost. Also the user doesn’t get any interests on his money. Thus for these payments, most people prefer either money transfers or credit card payments, which will also be supported as a third payment mechanism via secure Internet connections (SSL based).

Project partners
Main investigator r3 security engineering ag Project management, Crypto Smartcard implementation of MacPay
2nd investigator University of Geneva HyperNews application (SPP MEDIA project)
3rd investigator Swisscom Corp. Technology JAVA Smartcard implementation of MicPay
4th investigator ETH Zürich, TIK IP Phone application (SPP CATI project)
5th investigator Gemplus Card International Hardware supplier
6th investigator UBS, Zürich Customer demands, market concept, evaluation
Project schedule
7/98 – 12/98
MicPay/MacPay payment schemes, 
requirements for applications HyperNews and IP-Phone, 
smartcard environment
12/98 – 8/99
MicPay/MacPay scheme,  
HyperNews, IP-Phone interface, 
Internet banking integration
8/99 – 11/99
MicPay/MacPay on multifunctional smartcard,  
application integration
11/99 – 12/99
Project contact

Dr. Holger Petersen
Entrust Technologies Europe
r3 security engineering ag
Glatt Tower, 6.floor
CH-8301 Glattzentrum
Tel: +41 1 8778 637
Fax: +41 1 8778 687