Smart card days hve not come yet in USA

November 1, 2010

Smart cards may sound cool and exciting, but they might not be able to replace current credit cards just yet, according to The New York Times.

Even though smart cards have been around in their modern form for at least a decade, they are just starting to take off in the United States. Smart credit cards carry embedded integrated circuits that allow the card to hold memory instead of just acting as a standard form of payment. In Europe, the health insurance and banking industries use smart cards extensively.

Traditional credit cards are still in the running as the card of the future, according to The New York Times. While standard magnetic-stripe cards work with any of the approximately 13 million magnetic-stripe readers in the U.S., “smart cards” can only be processed by about 600,000 of the readers

Traditional card proponents believe that by keeping cards dumb and security centralized, the company can easily upgrade its central system at any time; changes take effect throughout the network instantaneously.

The biggest issue that divides critics is security. The magnetic stripe on credit cards is relatively easy for criminals to copy compared to those of some smart cards, which avoid this issue with the chips embedded within the card. The problem smart card issuers face is a lack of incentive for retailers or consumers to make the switch. Retailers would need to replace their card readers as different upgrades became necessary to make smart cards appealing.

Americans traveling abroad have reported numerous problems with machines and merchants that no longer accept our cards.

Almost 10 million U.S. cardholders experienced credit card acceptance problems abroad in 2008, costing banks $447 million in lost revenue, according to a study released last year by Boston research firm Aite Group.