EMV-based Smart Cards

With a smart card, consumers will have the capability to carry multiple currencies when traveling; make secure purchases over the Internet anytime, anywhere; pay for public transportation and public phone calls; as well as make traditional credit and debit purchases – all with significantly fewer cards.

Industry Insight
In September 2000, smart cards, a new futuristic payment card platform with multi-function capabilities powered by cutting-edge chip technology, were introduced. Smart cards enable financial institutions to combine the purchasing power of traditional payment cards with smart chip technology to offer added security, utility, and convenience to consumers.

Visa and MasterCard have mandated a move to EMV throughout Western Europe by January 1, 2005 and the following year in Asia-Pacific. EMV cards are required to store a PIN code, and terminals are required to come equipped with PIN pads. With the addition of PIN, retailers will no longer be required to retain a signed receipt to prove the legitimate cardholder made the purchase. Card issuers and merchants around the world will take a keen interest in the lessons learned from these rollouts.

How does the introduction of smart cards affect U.S. merchants?
The smart card program is initially targeted at Internet merchants in the U.S. The Internet is a distribution channel that can benefit tremendously from the additional security and authentication offered by smart cards. Physical world merchants are not required to make changes at this time to their acceptance practices or devices as smart cards will continue to use a magnetic stripe on the back of the card. However, some retailers may implement value-added couponing and loyalty services into their card issuing and acquiring programs requiring them to upgrade point of sale equipment to accept smart cards. Industry estimates put the cost at about $1 billion for U.S. retailers to upgrade point-of-sale terminals to accept smart cards.