Information on Merchant Accounts,
Ecommerce and Credit Card Processing

December 16th, 2005 by Jamie Estep

Smart Cards really aren’t that smart…

Filed in: Merchant Accounts |

Smart Cards looked like they were going to be the next big thing for credit card processing, for about 30 seconds.

A smart card is a small microchip that is implanted in a plastic card or a credit card. It is able to store a large amount of information in a very small space, and is not affected by magnetic fields, weather or really anything. Smart cards also have encryption capabilities that a magnetic strip could never have.

So, why aren’t Smart Cards more popular?

Before smart cards can ever gain popularity, two things must happen. First, card issuing banks must upgrade their customers cards to Smart Cards. Secondly, businesses must upgrade their equipment to be able to accept Smart Cards.

Both of these take a lot of money, effort and time, and so far, neither party has been quick to begin the change. Sure there are a few lonely banks and even lonelier merchants who are adapting to Smart Cards, but not the industry wide shift that would be required to jump start the Smart Card globalization.

One of the main hurdles is that Smart Cards is that there isn’t much of a benefit to switching to smart cards, and it may create more problems than credit cards alone. Because of the larger data storage capacity of Smart Cards, there is a potential to lose much more personal information, if a consumer looses their smart card. It has been proven time and time again that no matter how secure something is claimed to be, there is always a way to get through the security.

Most merchants will also have to pay several hundred dollars per terminal to be able to process Smart Cards, and banks will have to issue millions of new, more expensive, cards.

For merchants new to processing, or those who are looking at getting setup to accept smart cards, you may want to look twice. Getting equipment that can be upgraded to accept smart cards may be a smart idea for the future, but going out of your way to make sure you have the ability to accept them, is just a waste of time and money.

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