It sounds very European doesn’t it? “Smart credit card” isn’t something you traditionally hear when referring to credit cards here in the United States.
The reason it might sound “foreign” to you is because for the last decade or so, foreign countries have been using smart cards instead of traditional magnetic stripe credit cards.
In the United States, we developed huge online mainframe-based computer networks to verify and process credit card payments.
As of October 1st, 2015, all businesses in the US are required to be EMV Compliant. This means your business must be able to accept smart credit cards (also known as EMV cards or chip cards).
Europe never developed this infrastructure and instead started using cards which already had the technology built into the card. The card is “intelligent.”
What makes it so “smart”?
The difference between smart cards and magnetic stripe cards is they have a microchip embedded in them on the front of the card. This microchip stores all the user’s sensitive information on its tiny built-in circuits. Then, during every transaction, it produces a unique, encrypted code.
Smart cards are more secure than traditional magstripe cards.
Why, you ask?
Because traditional credit cards store the user’s sensitive credit card information on the magnetic stripe, which does not change (no unique encryption code) and can easily be copied by criminals. Once they have copied the information stored on the magnetic stripe, they can duplicate it over and over again for fraudulent purchases.
Unless the credit card holder notices right away and cancels the card, the criminal can continue to use it. While the customer won’t be held liable for fraudulent purchases, they might have to wait until an investigation is performed to use their card again.
As you can see this is a big problem.
Smart cards greatly reduce the likelihood of this happening. The little microchip makes all the difference. It encrypts the information which is transmitted during a transaction. Every time it’s used it creates a unique transaction code which cannot be used again.
It “talks” to the host computer and card reader being used.
Once this happens, the card is verified and authorized for use. The customer enters a PIN number, only they know, and it authorizes them to use the card for purchases.
New smart cards being introduced in the United States still have the magnetic stripe on the back for the time being. You can use the card in the traditional way with a card swiper too. But eventually, all new credit cards will be smart cards with microchips embedded in them and they will have to be inserted in a smart card reader for purchases.
They can be used online in the same way traditional cards are used. The customer enters their information the same way as with non-smart cards.
There are only a few small differences in the way smart cards are used and the process involved.
Customers have already started to notice smart card readers popping up at their local grocery and other retail stores.
They look very similar to magnetic stripe readers except they have a small smart card slot on the front of the terminal.
The customer simply inserts their card into the slot and the reader connects with the microchip. It “talks” to the smart card and the microchip facilitates access to the user’s account information. Once the reader has access to the user’s information, it verifies the card and authorizes the transaction.
“Dipping” the card in a reader will be a little bit different for customers than the traditional method of swiping the card through a reader.
There is a little bit of time difference in the authorization process with smart cards. It takes a few moments longer for the reader to talk to the smart card but it doesn’t take much longer than swipe cards. It will barely be noticeable by customers once they’ve gotten used to them.
Smart cards are the new standard of credit cards. They are much more secure than traditional magnetic stripe cards and this is, of course, the most important thing about them.
For business owners, this is a good thing for us, too. It gives us the added security of knowing our loyal customers’ personal information is safe in our stores.
These smart credit cards will reduce fraudulent transactions in-store and online. They are also reducing the number of data breaches (like the Target and Home Depot breaches).
Every change comes with growing pains and the cost might be high at first to set up new equipment. But in the end, both your business’ and your customers’ privacy and security is worth it, right?
Call RedFynn at (888) 510-9871.