After a long delay, smart card technology is coming to credit card machines in the US. MasterCard is pushing merchants to accept smart cards by April 2013 and Visa has set a deadline of October 2015. Capital Processing Network has smart card readers for all kinds of smart cards, including standard and contactless card types. Consumers are expected to adopt these cards in a relatively quick period of time, so all merchants should make their hardware ready to adopt smart cards in order to avoid lost sales and new penalties from major credit card brands.
What is a smart card? Essentially a smart card is a credit card with an embedded microchip that is either read by placing the card into a machine or waving it over an electronic sensor. Contactless smart cards are becoming increasingly popular compared to the more “classic” smart cards that are identifiable by a rectangular metallic contact pad on the card’s surface. For many years, smart card implementation had been delayed in the United States but in Europe, credit cards with chips in them have become almost universal. Simultaneously, fraud at ATMs and Point of Sale (POS) devices has declined dramatically, leading major credit card brands like Visa to mandate their implementation.
What happens if you don’t get a smart card reader? The downside of waiting to implement smart cards is that you will not be able to accept cards without a magnetic stripe, that you will pay a higher fee if you opt for the “dumb” magnetic strip on the card instead of using the “smart” feature. Although many smartcards also come with a magnetic strip on the back right now, issuing banks may not have an incentive to preserve this feature. After 2015, Visa will not assume any liability for fraud if a merchant’s card terminal has not been upgraded to the EMV smart card standard.
Over the past year, more and more consumers have received updated credit cards from their banks which include smart chips and/or RFID chips that enable the cards to be read with a contactless reader. The big three companies have implemented contactless technology including American Express ExpressPay, MasterCard PayPass, Visa payWave, and Discover Zip.
Because transaction times are lower when smart cards are used, the checkout line moves faster. Aside from the positive psychological impact on customers who feel rushed, the merchant can make more sales with fewer employees. Furthermore, improved security translates into fewer chargebacks and less time spent on disputed transactions. As more and more consumers become familiar with smart cards, the act of swiping a credit card through a reader is expected to become an analog relic akin to video and cassette tapes.
Shops that are slow to implement advanced smart card reading technology may experience a bias from consumers who enjoy the convenience of paying with contactless card technology. You may have already noticed contactless reader logos on machines at big-box stores and large grocers, and customers are going to expect the same convenience when they go to smaller stores. Therefore, if you make the conversion to smart card-enabled credit card machines today, you will not only be investing in the future or payment processing, you will have an immediate advantage over your competitors who are slow to adopt this emerging technology.