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How Do Smart Card Readers Work?

Amer Hafiz December 15, 2020 4 min read

Simply stated, a smart card reader is a device that is used to read, process, and transact the information stored on a smart card.

A smart card is a credit-card sized plastic card that houses a computer chip that can store personal data, perform data encryption and data validation.

Smart card and smart card readers are used in multiple industries such as banking and finance, travel and transportation, entertainment, and healthcare.

But how do they work and what are their benefits? In this Nortech guide, you'll learn: 

  • What smart card readers are and the technology behind them 
  • How smart card readers work
  • The different types of smart card readers 
  • Where smart card readers are installed and their common use cases 

Short on time? Download our Nortech Reader Comparison Table

What are Smart Card Readers?

A smart card reader is a hardware device required to write to and read the information stored on a smart card. The readers are easy to install appliances that can read the stored data on the smart card either by direct contact or contactless via Wi-Fi.

Nortech Reader Comparison


How does a Smart Card Reader work?

The smart card reader is used to interface with either a local computer or to remotely connect to an external information system and distribute smart card information back and forth.

When a smart card makes a successful connection to the reader (either by direct contact or contactless methods), the data residing on the microchip will be read by the reader and will be either processed locally or remotely.

As the smart card does not contain its own power supply, all processing energy requirements are provided by the card reader.

The smart card reader provides an information communication path for a business application to send and receive commands from the card. While each smart card reader manufacturer will have their own protocol for reader communication, the basic process can be simplified as follows:

  • In the first instance, a user will communicate with the reader (initiate start-up processes, commence smart card reading programs),
  • Secondly, the smart card reader will communicate with the smart card – acting as an intermediary between the smart card and the user. If information is required to be transmitted to an external secure information system, then this process will then follow.
  • Either the information system will reply to the smart card reader with processed data, or the smart card will process data that is returned to the smart card reader. Either way, this data is then returned to the originating source, the end-user.

There can be significant differences in smart card reader types, both with internal intelligence requirements and capability functionality. Industrial strength readers (which can be quite expensive) can support a wide variety of smart card protocols compared to the less expensive win-card readers who only work with specific microprocessor-based cards. 


Types of Smart Card Readers

There are basically two types of smart card readers available on the market: 

Contact Smart Card Reader

As the name implies, a contact smart card reader can only read the smart card data if there is a successful physical and stable connection between the smart card and the smart card reader.

This connection typically occurs when a smart card is pinned to the reader, inserted, and connected to the contact readers, or a physical smart card swiping motion occurs. Data located on the magnetic stripe is successfully received and read by the smart card reader.

The processor situated within the smart card has a working microprocessor chip system that can interface and interact with a wide variety of business applications such as a banking ATM system, entertainment systems, and access control systems.

Contactless Smart Card Reader:

With a contactless smart card reader, the information exchange is performed by radio waves, and these readers can interact with multiple smart cards at the same time.

A contactless card does not require any physical contact by the reader; providing the card and reader can wirelessly communicate (via secure and co-ordinated and compatible wireless protocols), data interchange can successfully occur.

To successfully communicate, there needs to be specific proximity or distance between the smart card and the smart card reader for communication to occur. 

Contactless smart cards are becoming more popular within western society. For fast and straightforward electronic payments, smart card readers are situated within all businesses that provide cashless payment options for their customers. 

The key difference between contact and contactless smart card readers is the manner with which the microprocessor chip on the smart card functions internally. Specific contact areas within the contact smart card must be physically in contact with the contact reader to exchange data between them, and only if a physical connection occurs will it do so.


Where are Smart Card Readers Installed?

As we have established, Smart cards are just one component of a highly intricate system that consists of a smart card reader. This means that the smart card must be precisely specified and matched to function with a smart card reader.

Otherwise, security would be compromised, or application-independent standards that support multifunctional cards would be needed.

That being said, you’ll be sure to find a smart card reader at any government facility, corporate setting, and university campus. As well as being used for instances like e-commerce transactions, network security, vending services, loyalty and health care card implementations etc.

In summary, from a technological and organizational perspective, the sophisticated systems implemented to make smart cards function are mainly kept behind the card reader. Acting as a serial interface, the card reader will always supply power to the card, establish a data link and facilitate data exchange.



Both contactless and contact smart cards and smart card readers are ideal for personal identification, authentication, and private data storage needs. They provide a platform so that secure business transactions can occur in a flexible, safe, and standard manner with minimal human intervention required.


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Amer Hafiz

Amer is Nortech's long standing technical expert and thought leader. He has previously taken technical roles at Hitachi, Sony & Panasonic having graduated from Cardiff University with a First Class Honours in Electrical Engineering.

Amer has been featured in numerous industry publications such as Source Security, BSIA, PSI Magazine & Security Informed for his knowledge on technology advancements and its impact on access control.

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