Nicholas DiGregory
While the holiday season is usually accompanied by extravagant announcements of better, brighter, and more meaningless high-tech toys, there is one piece of recently-released technology that you may want to pay attention to: “smart” credit cards.
These “smart” credit cards, also known as “chip” cards, have been stealing headlines and filling search engines since their introduction earlier this year. Countless debates have been started regarding their security, efficiency, and cost-effectiveness. There has been much speculation regarding these little pieces of plastic, but you can be sure of one thing: if you don’t have one in your wallet or purse yet, you probably will very soon.
The United States is slowly leaning towards full adoption of the integrated circuit cards that we know as “smart” or “chip” cards. Developed through a joint effort by EMVco—a consortium of the major credit card companies led by Europay, MasterCard, and Visa—integrated circuit cards were developed to make digital transactions more secure.
Until now, credit cards have solely utilized a magnetic strip to relay their digital signatures during purchases, a process that was relatively easy for hackers to counterfeit. The new integrated circuit chips do not have that weakness; when you insert a chip card into the card reader, it generates a one-time-use authorization code that must match the individual transaction. Additionally, chip card readers require a signature or pin to provide an additional layer of security.
But the question remains: Do these extra security features really work? According to the Smart Card Alliance, which was formed in 2012 to find a solution to magnetic strip credit cards, integrated chip cards have cut down fraud-related damages by sixty-seven percent in the U.K. and seventy-three percent in Canada. The Alliance expects a similar response in the U.S., once integrated circuit cards have been fully instituted.
While the additional security of integrated circuit cards has helped to streamline their widespread introduction in the United States, many companies and consumers have criticized the longer wait associated with a “smart” card purchase. If you’ve done any holiday shopping recently, you’ve probably experienced the high-tech hassle of the chip credit cards—or maybe you haven’t. That’s because only about twenty-five percent of major retailers are utilizing the microchip technology of the new “smart” credit cards, according to a survey conducted by ConsumerWorld.org.
Although ninety-nine percent of major retailers have installed integrated circuit card readers at their registers, only ten percent of those chains can actually use those readers at most of their stores. According to the ConsumerWorld.org survey, only Walmart, Sam’s Club, Target, Best Buy, Home Depot, Lowe’s, Macy’s, Old Navy, Rite Aid, and Walgreens have fully adopted the integrated circuit card system.
Most other major retailers have expressed their intent to switch over to integrated circuit card readers once the holiday season has ended. Reasons for this rationale have varied with each company, although most of the retailers have emphasized that the holiday season is not the time to overhaul the purchase process by implementing new software and hardware, thus creating confusion among customers and employees alike.
While most major retailers will have instituted “smart” card systems by the early months of 2016, most experts believe that it will take the United States several years to switch over to the chip card system completely. Javelin Strategy and Research, a corporate research group that reviews transaction trends and practices, predicted that the United States will not fully adopt the integrated circuit card system until 2019. This is due mainly to the fact that smaller businesses will not be able to process chip cards until the card readers and their software becomes less expensive.
So what does all this mean for you as a credit card user? Well, although your credit card company is likely issuing new “smart” cards already—you may already have one—it may be a while before you can utilize their additional safety benefits at most of the stores you visit on a daily basis.
