EMV Cards for 2013

If you’ve traveled to Europe in the past ten years and encountered problems when you tried to use a credit card with a magnetic strip on the back, you’re not alone. But Visa wants to make sure that never happens again by pushing the adoption of a universal AND more secure credit card technology in the United States.

Also known as “smart” cards, EMV chip-based payment cards contain an embedded microprocessor, which is a small computer chip containing the information needed to make a payment with the card. Protected by security features, these chip cards are more secure than the magnetic stripe payment cards that most people in the United States take for granted. Here’s how it works.

When processing a payment card with a magnetic stripe, only data containing the card number and valid dates of use is transmitted, leaving the transaction open to fraudulent activity. But chip card transactions exchange dozens of pieces of information between the card, the POS terminal, and the acquiring bank’s host, allowing a significantly higher level of security and verification. This means that stolen and counterfeit cards would be useless at the point of sale, lowering costs for merchants, card-issuers and consumers alike.

The time seems to be right for adoption of the new technology, as American financial institutions have recently begun issuing chip-cards to customers who are planning international travel. And some large merchants (like McDonald’s) have already started installing the chip POS terminals.

No later than April, 2013, Visa will require processors in the United States to be able to support merchant acceptance of chip transactions. The adoption of this new technology will challenge merchants financially, but decreased fraudulent activity in the long run will likely present significant savings, creating a win-win situation for the credit card industry and for consumers.