I. Background for Developing and Revising the China Financial Integrated Circuit Card Specifications
The China Financial Integrated Circuit Card Specifications (Version 1.0) was issued by the PBC in July 1998 to address the needs of inter-bank and cross-regional off-line transactions via bank card. Since 2000, with the initiation of EMV migration in the international community, relevant research and fieldwork have been carried out by the PBC Technology Department to keep pace with the changes. Moreover, China Strategic Seminar on the International EMV Migration for the Bank Card was held to formulate best practice guidelines and further development strategy, namely “respond prudently, get well prepared, follow the trends, and start with priorities” and “develop standards before pilot implementation, processing transactions before card issuance”. For this purpose, the PBC issued the China Financial Integrated Circuit Card Specifications (Version 2.0) in 2005.
In order to addressy the needs of low-value and fast payments in the domestic bank card markets, the PBC again organized the revision of and supplement to the Specifications. In April 2010, the China Financial Integrated Circuit Card Specifications(Version 2010, JR/T 0025-2010) (hereinafter as the PBOC 2.0 ) was issued, with main additions of low-value payments and contactless payments. Taken as an important achievement and a significant milestone in financial standardization, the Specifications 2.0 addressed the direction in financial IC cards developmentand paved the way for further development and application of China’s financial IC cards in public services.
PBOC 2.0 comprises 13 parts. Parts 1 and 2 define the applications of electronic wallets and electronic passbook, which can support off-line inter-bank and inter-city low-value payments. Referring to EMV 4.1, VIS of Visa and M/CHIP of MasterCard, Parts 3 to 7 describe debit/credit applications realize the debit/credit functions of bank cards.. Part 8 is on contactless interface specifications based on the ISO14443. It defines contactless interface irrelevant to applications, which can be combined with electronic wallets/passbook or debit/credit applications to form relevant products with contactless interfaces. Based on the particular needs of relevant industries, Part 9 defines the multiplex consumption and grey-lock consumption, which was takenas an extension of the standard electronic wallet and designed to address the special payment needs in relevant industries. Part 10 is formulated based on the EMV Card Personalisation Specification, which provides guidelines and unifies the personalization process of personalization of debit/credit as well as the data format and grouping. Based on Part 8, Part 11 specifies the technical requirements for the wireless communication protocols between contactless equipment and contactless cards. Part 12, constituting the contactless applications together with Parts 11 and 8, defines the financial payment application based on contactless interface. Part 13 constitutes the low-value payment application based on debit/credit applications together with Part 4 to 7, and specifies the specific issues of low-value payments such as the technical implementation and types of transactions supported.
II. PBOC2.0-confliant Financial IC Cards Addresses the Financial Payments Needs in Public Services
PBOC2.0-confliant Financial IC cards are universal, secure and easy to use, which incorporate multi-functions like transfer, settlement, deposit and withdrawal, and consumption credit on an in-built computer chip embedded in one single card. These multi-purpose IC cards have effectively served the diversified payment needs in public service sector.
Firstly, PBOC2.0-confliant financial IC cards addresses the requirements for general use and security of payment products in the public service sector, in which security remains a fundamental requirement for a payment mode. With the accelerated development of China’s public services sector, public services call for an extended selection of fast and convenient payment options. Although the extensions of established payment systems as well as new payment methods have satisfied part of the urgent needs in the sector, they raise increased concerns about the payment security due to the inconsistency in technical standards, security levels and management methods applied by different financial institutions. Therefore, secure and universal payment services are required to be rendered by the financial departments.
Secondly, the multi-functional financial IC cards address the diversified payment needs in nowaday’s public service sector. Indeed, a wider range of simple, fast and convenient patyment options supported by advanced financial technology are needed to fit our busy life. However, the inconsistent technical standards applied across the sectors and a variety of different payment methods available nationwide have undermined both the efficiency and effectiveness of payment service and cuased ongoing inconvenience to terminal users. The new financial IC cards can be used for urban public transport, social security, medial insurance and various government services, and can be extended to other public services in connection with people’s daily life. Such a unique feature will enable the financial institutions to support social and public management and facilitate the application integration of financial payment market. In addition to the existing services provided by financial IC cards, i.e. urban public transport, bill payment, social security, medial insurance, public utility services and government services, new range of public service applications closely related to everyday life are called for.
Thirdly, the financial IC cards address the needs for rapid and convenient low-value payment in the public service sector. With the accelerated pace of modern life, the needs for a wider range of simple and convenient payments options have increased remarkably; same is the payment frequency. Indeed, greater proportion of these public service needs is low-value payments or retail payment closely related to everyday life, such as water and electricity bills, entertainment, shopping and etc. Cash is no long King in modern life and people are increasingly less willing to carry large amount of cash or change around for everday purchases. Obviously, certified cheque or bank drafts are not suitable for low-value payments when shopping at supermarkets or grocerymarkets. Although the magnetic card can address the general needs of low-value payments, the requirement for online transaction makes it hard to meet the increasing need of fast and frequent low-value payments. In comparison, it is the contactless financial IC cards that can be used off-line fill the deep gaps in low-value payments and cater for the most pressing needs of both the public and government.
Ш. Main Features in the Application of the PBOC2.0-compliant Financial IC Cards -in the Public Services Sector
1. Consistency. Standardization is the lifeline of an industry and the basis for maximizing social benefits. Standardization helps to regulate and promote the development of bank cards, and, more importantly, facilitates the card-holders to learn about the bank cards and how to use them. As the substitutes for bank cards, the financial IC cards will stick to the principles of standardization and interconnection. This will provide uniform financial IC card standards for the issuance and use of all types of payment cards in China, and set the solid foundation for the long-term and robust development of personal payment services in China.
2. Security. The debit/credit applications defined in the PBOC 2.0 provide for dual security protection of off-line and online data authorization. The offline authorization is implemented through asymmetric key algorithm. This allows card-authorization by just downloading the public key of the root CA at the terminal, which is very convenient. As for the online authorization, the symmetric key algorithm is used instead. This requires a two-way authorization of card from both the terminal and the issuing bank, to ensure the security of online transactions. The dual protection can avoid fraudulent transactions or counterfeited cards. Security is especially important for public services which affect people’s livelihood. Meanwhile the new financial IC cards are issued by financial institutions under uniform standards. Since the personal funds are deposited at banks, and the settlement channels are controllable, they can effectively reduce fraudulent activities or counterfeited cards, and can be deemed as the most secure and reliable financial payment tools. Therefore, the financial IC cards will help to regulate and guide the development of payment cards and maintain the healthy personal payment system in China.
3. Convenience. Contactless and low-value payment supported by the PBOC 2.0 can easily satisfy the requirements of various types of low-value payment in daily life. The ability to make payments in a fast and convenient way and the convenient charging (at bank counter, 24h self-service banking or loading equipment) greatly improve and facilitate people''''s daily life and help to avoid carrying cash and various payment cards which may be lost or counterfeited. It is the most convenient and efficient method of payment. In particular, the vast, advanced and increasingly improved card processing network can ensure the fast, secure, convenient and customized quality services in the public service sector.
4. Efficiency. The use of standardized financial IC cards will help to cut social costs and improve economic and financial efficiency. From the cardholder’s point of view, using standardized financial ID cards means they no longer need to take with them a large number of different cards which are really inconvenient and complicated to use. From the business practitioners’ point of view, it’s convenient for them to process the financial IC cards as they no longer need to equip themselves with a variety of card-readers. In addition, since the financial IC cards support off-line transactions, the communication costs can also be reduced. With regard to banks, they can develop multiple-applications and value-added services and focus on the improvement of service quality and the efficiency of financial resource utilization. Industries will also benefit as they may stop short of issuing different cards for different industries, purchasing terminals of similar functions, building up a tremendous payment network, or developing payment systems for different industries. From the social point of view, using the financial ID cards can help to reduce cash production and circulation, exploit the existing financial resources to the full extent, cut social costs and achieve intensive development.
5. Universal application. The PBOC 2.0 can apply to all areas of public services. In recent years, it has been rapidly applied to social security, public transport, tourism, fast food, expressway, and parking etc. It can not only satisfy the needs of the banking industry but also the needs of financial payments in other industries, especially public services. The vast, advanced and increasingly improved card processing network can offer wider applications in the public service sector than in the past. Meanwhile, the financial IC cards also adapt to the global EMV migration launched by international card organizations and can raise China’s voice and competitiveness in electronic payment in the international community.
6. Innovation. Financial IC cards can drive innovations in banking business through technological innovations. Financial institutions can make full use of the multiple-applications of financial IC cards to further subdivide the market and business of financial services, reinforce R&D capabilities in customized financial services, design financial card products catering to the diversified market needs, complicated risk control profile, and differentiated business management, so as to overcome the drawbacks of different magnetic cards yet with similar functions and limited room for innovation, and to further enrich and innovate financial services.
IV. Examples for Application of PBOC2.0-compliant Financial IC cards in the Public Services Sector
(I) ICBC Peony Driver Card
ICBC Peony Driver Card is a co-branded credit card issued jointly by the Beijing Traffic Management Bureau under the Beijing Municipal Public Security Bureau and the ICBC Beijing Branch in order to promote the construction of urban transport infrastructure, realize computer- and IT-based traffic management and provide convenience for drivers. The card conforms to the credit standards and electronic cash low-value payment standards as specified in the PBOC 2.0 in terms of financial payment, as well as the contactless payment standards with regard to transaction interface. Thanks to the wide implications in PBOC2.0, PBOC 2.0the ICBC Peony Driver Card not only can be used as credit card in traditional business transactions, but also supports low-value contactless payment for fast payment. In addition, as PBOC2.0 is extensible, PBOC 2.0the Peony Driver Card can also be applied to help handling traffic offences, traffic accidents and periodical review of drivers’ qualifications.
As of the end of 2010, over 3.7 million ICBC Peony Driver Cards were issued in Beijing, which replaced the original cards of most drivers. Currently, ICBC has launched the scheme in other provinces and municipalities such as Shanghai, Shaanxi, Tianjin, Jiangsu and Guangdong. ICBC has also introduced a series of other financial IC cards including the Guangzhou-Shenzhen Railway IC card, Shaanxi Express Card, Mobile Phone Credit Card, National Travel Card, Chimelong Peony Credit Card, and Peony Housing Provident Fund IC Card. ICBC (Asia) and the Guangzhou-Shenzhen Railway issued the dual currency co-branded IC card, which marked the entry of China’s financial IC cards into the overseas market.
(II) Ningbo Citizen Card
Ningbo Citizen Card is a co-branded IC card based on the PBOC 2.0 issued by the Ningbo Municipal Government and the citizen card institution authorized by relevant commercial banks. It is used by Ningbo citizens to process relevant personal affairs and enjoy public services. In January 2008, the PBC chose Ningbo for pilot project of multiple applications of financial IC cards. With the support of the Ningbo Municipal Government, the Ningbo financial IC card combines the functions of debit/credit, electronic wallet and industrial management, which integrates bank cards and industry-specific IC cards. The uniform financial IC card for the city provides a more convenient public service platform and vehicle for citizens. The successful pilot project shows that such card is well received and satisfying. As at the end of 2010, over 700,000 citizen cards were issued in Ningbo, marking a remarkable progress in the project.
The Ningbo Citizen Card integrates the functions of public transport, taxi, traffic management, tourism and social security. As multiple sectors are involved, a uniform standard is required for its implementation. The PBOC 2.0 becomes the first choice for the card thanks to its universal application, extensibility and high security. To some extent, the PBOC 2.0 is the cornerstone under the success of the Ningbo Citizen Card.
(III) Tianjin Express Card
Tianjin Express Card is a bank card provided by card issuers in Tianjin. Based on the PBOC 2.0 and magnetic card technical application standards, it can be used in the financial industry and other specific fields. A Tianjin Express Card is either a debit card or credit card depending on the application and credit standing of the applicant.
The Tianjin Municipal Government has launched a series of supporting policies to facilitate the development of the Tianjin Express Card. For example, the card issuers of different industries should open up their industry-specific card systems and reconstruct the acceptance machines and devices in accordance with financial IC cards standards, to ensure the universal application of the Tianjin Express Card in all local application fields. New industry-specific cards should no longer be issued, and regulation supervision over the issuance of sector-specific cards, account opening and fund use should be reinforced. Public transport, petrol filling, traffic management and social security were chosen as main application fields for the financial IC card, while extension to other sectors would be conducted depending on the progress of the current project.
V. Outlook for Application of Financial IC Cards in the Public Service Sector
The PBC issued the Opinions of the People’s Bank of China on Promoting the Application of Financial IC Cards (hereinafter the “Opinions”) in early 2011 to promote the overall application of financial IC cards. It put forward the following objectives: “During the 12th Five-year Plan period, all concerned institutions shall accelerate their adoption of chip-based bank cards and make majority of the new bank cards issued to be financial IC cards. They shall promote the integration of financial IC cards with public services and the adaptation of financial IC card applications to international payment systems, and integrate the financial IC card applications with innovative applications such as internet payment and mobile payment”. It also emphasizes the principles of “unify standards and encourage innovation based on government guidance and market orientation”. The Opinions opens a new page for the development of China’s financial IC cards.