Chips Not Strips Becoming Standard for Credit Cards

Breaking free of the magnetic strip technology developed in the 1960s and 70s that is still in use today, merchants and financial institutions are switching the standard to the more secure microchipped cards frequently used in Europe and other destinations abroad. Ezine Articles explains, EMV is an acronym for EuroPay, MasterCard and Visa and it is a standard for inter-processing of IC or integrated credit cards also called PIN and Chip cards.

Americans tend to take their time and watch how trends work in Europe before implementing them in the United States. Bill McCracken, CEO of Synergistics Research Corp., an Atlanta-based marketing research firm for the financial services industry speculates to Bankrate.com, "The U.S. is behind for a very simple reason: Consumers have not been asking for chip cards. They have not understood the benefits of a chip card over a mag stripe. So why switch?"

It’s basically the theory - if it ain’t broke don’t fix it. However with easier access to counterfeit processing tools like skimmers and an ever increasing fraud rate, people are beginning to realize maybe the current system is not all it's cracked up to be. The big difference in the two ways to process payments is that magnetic strips store static information which thieves can lift and apply to a bogus card before going on a shopping spree. Cards with chips carry encrypted information that creates a unique signature for each transaction. Even if the phone line or internet connection is tapped the data thief will only be able to access useless scrambled data. However, the security features for online and on the phone transactions where the card is not present is pretty much the same.

Eric Lindeen, marketing director for Zoot Enterprises, a Bozeman, Mont., firm that provides credit decision and loan origination solutions to financial institutions offers some insight on the switch, "If we are going to have a massive infusion to replace the infrastructure," he says, "card-not-present fraud needs to be addressed early in the process, so we don't have a blind spot where fraudsters have a wide open field."

Most of America’s major financial institutions and credit card companies have agreed EMV cards are the way to go and intend to implement them as a standard scheduled to be in place by April 2013. Mobile Payments Today reports, Randy Vanderhoof, executive director of the Smart Card Alliance recently said, "Now that all of the major payment brands have announced their plans and milestones, we are anticipating fairly rapid deployment of EMV in the U.S., harmonized with contactless and NFC payments acceptance. Through this white paper containing all of the latest information and guidance, the Payments Council is providing guidance about the roadmap for EMV migration to make this important shift in the United States as seamless and successful as possible."

As of June 2012, Visa, MasterCard, Discover and American Express are all on board to make the switch to EMV cards in the spring. More and more companies are opting to implement the standard as the deadline draws closer. In the meantime, merchants preparing to make the switch have multiple processing options and can run both kinds of payments. Currently, most smart cards are dual-functioning and feature the microprocessor chip along with the traditional magnetic stripe for use inside and outside of the U.S.

Companies already using EMV cards include:

•  U.S. Bank's FlexPerks Travel Rewards Visa credit card.
• Citi's Corporate Chip and PIN credit card.
• Chase's J.P. Morgan Select Visa Signature credit card.
• Chase's J.P. Morgan Palladium credit card.
• Wells Fargo's Visa Smart Card (credit card pilot program).
• North Carolina-based State Employees' Credit Union EMV debit cards.
• The United Nations Federal Credit Union chip and PIN credit cards.

Thieves will always find a way to swipe what they want but no one needs to make it easy for them. These days, information is more valuable than almost anything else so it high on the list of what thieves want so anything that will protect private financial data from fiends is a good idea. Changing up technology and the process involved of passing information more often than every 4 or 5 decades will give power to the merchants and keep cyber criminals on their toes.

Image courtesy of David Castillo at FreeDigitalPhotos