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May 8, 2014

United States credit card system begins complete overhaul in the next 18 months

by John_A

A concept image of credit cards fanned out to pick one.

The United States is lagging behind most of the world when it comes to credit card technology, but luckily it’s about to catch up. In the next 18 months, the US is gearing up to transition debit and credit cards away from the magnetic stripe to chip-and-PIN technology, which is already widely used in Europe, Asia and beyond. Who can you thank for the long-overdue upgrade? Target, whose data security breach earlier this year highlighted the security flaws in the magnetic stripe system. It’s a 50-year-old technology, after all, and it’s much easier to counterfeit than the computer chip in your next Visa card.

In addition to adding a chip to each of the 1.2 billion credit and debit cards circulating in the US, the rehaul requires upgrading card readers at retail locations, and there’s plenty of incentive for businesses to hop on board with the change. If your local WalMart doesn’t adopt chip and PIN readers, it will be held accountable for any fraudulent face-to-face transactions. Point-of-sale systems used by smaller businesses, such as Square and PayPal here, will need to reissue card scanners as well.

According to research firm Javelin, the upgrade could take about three years, with international and premium cards getting the switch to chip and PIN first. For the record, there are already several cards with the new tech available to Americans, from American Express and JPMorgan Chase among other institutions.

Filed under: Misc

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Via: Bloomberg

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