Recently received a new credit card that has a microchip on its front? Wondering about the change?
Credit cards with security chips are a part of the new card processing system being adopted by the U.S., whereby the card used by a consumer will have a special microchip that will need to be inserted in a reader rather than swiped at a checkout terminal to close a transaction.
The new credit cards look like any old credit card except that they have a tiny metallic chip on the front. The chip-embedded cards deploy EMV microchips, which is short for Europay, MasterCard and Visa. This system is already in use in several parts of Europe.
The microchip basically contains a user's payment information, which so far was contained on the magnetic strip. The microchip also gives a novel code which is different for every purchase.
The transition to chip-enabled credit cards will make life more difficult for criminals as they are more secure than magnetic strip-only cards.
How? Because the microprocessor in the microchips - which is like a mini computer - adds an additional layer of security for each transaction.
According to Visa's Stephanie Erickson, Head of Authentication Product Integration, while criminals were able to make counterfeit physical copies of magnetic strip-based cards, the chip-based cards will make the process more difficult. Since the chips contain data relating to a specific purchase, their reproduction is tough.
"They can't create a counterfeit card which is two-thirds of the fraud we see in the system," says Erickson.
Moreover, Erickson opines that countries which shifted to this technology within two years of the transition, saw the counterfeit reduce by 60 to 70 percent.
Some may argue that the unique transaction code generated by the chip every single time the credit card is used may lead to a compromise. However, experts alleviate the fear by assuring that even if the code was gotten hold of by a thief it would be worthless.
One, however, would still be required to sign even when deploying a chip-based card.
While the new system promises more safety, a downside of the new microchip-based credit cards is that they take longer to process when compared to the older system. If an old swipe transaction took three to five seconds, then this "dip" method takes between five to ten seconds.
The increased time for transaction would impact the lines at the checkout and could be a problem especially during high-traffic periods such as Black Friday.
On Oct. 1, merchants - not card issuers - will be responsible for fraudulent transactions if they don't upgrade their payment terminals.
