Reason #1: Smart is sexy.
Smart cards are tomorrow’s answer to the age old question—when are we carrying around too many cards? Today, an individual citizen carries an average of 4-5 cards for a variety of purposes, including a driver's license, health insurance card, credit / debit card, student ID, work badge, and the list goes on. Why carry more than you have to? Smart cards come with more features for security and can often hold information for multiple cards, reducing your overall burden.
Though they are both used for the same purposes, smart card designs and characteristics are more sexy than the similarly-shaped but inefficient magnetic card.
Reason #2: Smart is secure.
What makes smart cards "smart" are their microprocessors—today’s answer to many of life’s complex problems. They might’ve powered computers and mobiles among other things but as it happens, they also form an integral part of today’s smart card. These microprocessors, or chips, are what make these cards ‘smarter’. The chips make the cards secure. The chip speaks with both the background security system (the host server) and the card reader (the terminal) with an encryption system that connects the three. This way there is no unauthorized interception of the data present on the card, making smart cards the perfect choice for consumer and corporate uses.
Magnetic stripe cards, on the other hand, never had a microprocessor. They are basic and rudimentary in their purpose. Their utility is rather limited and they don’t boast advanced security measures. For starters, they are very susceptible to modification–anyone with off-the-shelf equipment can change, add, and/or delete information present on the card, making them a extremely risky in today's world with rampant and hard to detect fraud. They are popular in America due to their ubiquity but this trend is witnessing a change in a post-PRISM world. Most other countries that have payment cards have already adopted the chip-based cards.
Reason #3: Smart has better PR.
Big retailers like Target have recently been exposed to security breaches, resulting in the leak of customer information likened to the 'Chernobyl of payments' . The entire saga has put the traditional magnetic stripe cards come under the scanner for their poor security features.
While not immune to fraud, there have been no large scale identity fraud cases involving chip cards to date.
Stay tuned—in the next post of this series we'll also talk about the security technology behind smart cards. If you are a merchant who wants more in-depth information on how to prevent fraud when taking payments, email us to learn about the October deadline for switching to chip-based terminals.
Matthew Koren is the President of Swiftly Paid, a credit card processing and payroll service provider located in Portland, OR. He runs his company, as well as partnering with a consulting practice taking businesses to market in China. You can contact him by filling out the Contact Us page, or by calling 866-402-1485, ext 750.