Two technologies will be competing for your approval in coming months: EMV technology and chip-and-pin credit card.
Both use a microchip inside the card to process and transmit information via a card reader and authenticate the card user. EMV, for Europay, Mastercard, and Visa, is a global standard for integrated circuit cards which offers more security than magnetic strips.
EMV technology is widely used in Europe as protection against fraud and is becoming a worldwide standard.
The chip-and-PIN system is a type of EMV-enabled card with a PIN number to approve offline transactions.[1] Fraud protection is a key reason for the change. More information can be put on the chip than on a magnetic strip, further increasing its effectiveness.
Merchants in the United States have balked at supporting EMV due to the cost of buying new card-readers, but card issuers are coming up with plans to force merchants into changing. Last year, Visa came out with a plan that would exempt merchants who make the change from having to complete the annual validation process, a huge cost saving. That was the incentive part. The push is the shift of liability to the merchant if a fraud is committed while using a magnetic strip. Currently, the card issuers accept this liability.[2]
Visa has set up deadlines for the changeover, giving companies that process Visa transactions and set up Visa relationships with retailers until April 2013 to support EMV technology. Retailers who don’t accept EMV cards by 2015 will then have to take on the fraud liability, according to Visa. Gas retailers will have until 2017.[3]
MasterCard is also pushing for EMV. Bank of America, Chase, Citi, U.S. Bank, Wells Fargo, and PNC have all added EMV cards to their lineup, mostly to corporate cards and cards for international travelers.[4]
But technology is always able to learn new tricks.
For the credit card industry that spells NFC, which stands for Near Field Communication. Combine NFC with smart phones and what do you get?
A technology that allows two NFC devices placed within a few inches of each other to wirelessly swap data. All you’ll need to do is touch your NFC-enabled smart phone to an NFC enabled reader to pay for your purchase.[5]
Nokia, Sprint, and Research in Motion are working on making NFC-enabled smart phones, and it is rumored that iPhone is doing the same. Rather than be left behind, card issuers like Visa, MasterCard and American Express are partnering with AT&T and Verizon to develop their own brand of NFC-enabled devices. Visa is even planning to showcase this technology at the upcoming Olympics in London. Britain is already embracing this technology, which promises to change all our daily routines, from needing tickets to events or having to present our ID card.
Which technology will you be using? New or newer?
[1] http://www.bankrate.com/financing/credit-cards/visa-breaks-down-emv-cards/
[2] http://www.bankrate.com/financing/banking/visa-to-push-fraud-fighting-chips/
[3] http://www.bankrate.com/financing/credit-cards/card-pushes-harder-for-emv/
[4] http://www.bankrate.com/financing/credit-cards/card-pushes-harder-for-emv/
