Stopping Credit Card Frauds? Smart Cards are coming!
Credit cards have become one of the world’s most common tools of trade, particularly in developed countries with well-developed technology and financial sectors. Accounting for billions of dollars per day in transactions, credit cards are not only a valuable tool for both businesses and consumers in their day-to-day lives, they’re also an integral engine for spurring global economic activity as well. But such massive amounts of wealth have the inevitable effect of attracting unsavory characters, and credit card fraud has become a rampant problem in recent years.
In an effort to rectify this problem, the world’s major credit card companies – including VISA, Mastercard, American Express, Discover, and more – are all introducing smart cards to replace their old credit cards. But what, exactly, are smart cards, and what do business owners and consumers need to know about them moving forward?
The key development of smart cards, in terms of technology, is the presence of a small micro chip embedded into each new credit card. Rather than simply relying on the old magnetic strip to “swipe” cards and authorize transactions, now merchants will need to place the customer’s credit card into a specialized new EMV Smart Card Terminal to verify the authenticity of the chip, at which point the customer will be prompted to enter their password.
So what’s an “EMV Smart Card Terminal” anyways? Well, EMV stands for Europay, Mastercard and VISA – the world’s 3 largest credit card companies. The new EMV terminals, for their part, are built to be able to verify the authenticity of smart card micro chips. This two-step security process is predicted to massively decrease credit card fraud around the world.
While the credit card companies have begun switching over to smart cards in 2014, merchants too will need to upgrade their hardware to keep up with the times. If a merchant doesn’t have an EMV compliant smart card terminal and they process a fraudulent transaction, they could be held liable for fines of up to $50,000! That’s the kind of penalty that few small businesses can afford to pay, so upgrading to a new smart card terminal should be a priority. Doing so will not only improve security and decrease the odds of credit card fraud, it will also insulate you from unnecessary fines as well.