A smart chip is the brain of a smart card, sometimes called a computer on a card because it contains a microprocessor as well as memory, like a computer. One of the most important uses for a smart chip is as an identity card, to hold and protect credentials that can be used to authenticate a user in a sensitive transaction.

A credit card, one of the most commonly used identity cards today, lacks both the intelligence and the memory space to support authentication. The simple means of authentication that have been used with these cards, like checking the signature against the sales receipt do not work well in today’s e-Commerce environment. Cards containing smart chips and more intelligent card readers and software may replace the credit cards of today so that strong authentication can be used in both face-to-face and Internet-based transactions.