New ‘Smart Card’ Technology To Reduce Credit Card Fraud
BOSTON (CBS) – It’s a small silver square sending a wave of ripple effects through retail.
That silver square is a small microchip on the front of credit cards that is now being introduced to the US market.
“The big benefit for the chip card is all about fraud reduction,” says Ron Shevlin an industry analyst for Aite of Boston.
Shevlin says the microchips are a lot harder to counterfeit than those traditional magnetic strips.
Many countries have already made the switch to these so-called smart cards. In fact, so many countries have already starting using the smart card, there’s a chance your current card might not work if you travel overseas.
“It’s worth it to consumers for sure, because we’re talking upwards of 10 to 11, even more, billions dollars of fraud every year that will be eliminated,” explains Shevlin.
The switch will be costly since every charge card customer will eventually need a new card and all those retail credit card terminals will need to be updated or completely replaced.
The government is not mandating this change but credit card issuers are pushing ahead with hopes of making a full transition by 2017.
“There will be a confusing period of time. Especially, if you have multiple cards from multiple issuers,” says Shevlin.
Retailers could run the risk of being held liable for any fraud, if they fail to convert to the new system.