A smart card resembles a credit card in size and shape, but inside it is completely different. The inside of a smart card usually contains an embedded 8-bit microprocessor . The microprocessor is under a gold contact pad on one side of the card. Think of the microprocessor as replacing the usual magnetic stripe on a credit card or debit card. In Europe the health insurance and banking industries use smart cards extensively.
Every German citizen has a smart card for health insurance.
Therefore, the stripe is really not the best place to store sensitive information. To protect the consumer, businesses in the U.S. have invested in extensive online mainframe-based computer networks for verification and processing. In Europe, such an infrastructure did not develop and instead the card carries the intelligence. There are advantages and disadvantages to both systems. The microprocessor on the smart card is there for security.