How Credit Cards are Getting Smart
With so much progress being made every day in all aspects of technology, it is no wonder that credit cards are changing as well. New credit cards are being offered that boast of the new “smart” technology. Not to worry, we aren’t talking about artificial intelligence, but just a common-sense application of microprocessors that can make credit cards even more effective and easier to use.
The "smart" credit card is an innovation that actually uses cryptography, or secret codes, to identify you and your card to the merchant. The smart card has a built-in microprocessor that is hidden within the card itself. Cryptography is incorporated into the way these cards function in a number of ways. It’s almost like an interaction between secret agents.
The smart card and the credit card reader go through a sequence of encrypted sign and countersign exchanges designed to verify that each is a valid counterpart. Once the official “identities” have been established, the transaction itself can be carried out in an encrypted form. This is designed to prevent anyone, including even the cardholder or the merchant whose card reader is involved, from listening in on the exchange. This protects against anyone later impersonating either side in order to defraud the system or steal an identity. This entire elaborate protocol is actually conducted in such a way that it is invisible to the credit card user and merchant. Your only direct involvement is to enter a PIN to begin the transaction. The credit card user has to corroborate his or her identity to the card in the same way that the card and the credit card reader verify their identities each time a transaction is made. This is similar to the way that a PIN is used with an ATM.
The chips in these smart cards are actually capable of many different kinds of transactions. For example, you could use one smart card to make purchases from your credit account, from your debit account or from any stored account value. These cards are even reloadable, so you can add money to them. With their enhanced memory and huge processing capacity, the smart card is many times more versatile and expandable than traditional magnetic-stripe cards because it can accommodate several different applications on a single card. It can also carry your identification information, keep track of your participation in any reward or cash-back program, and even provide access to your office or apartment. This could mean no more searching through the cards in your wallet or purse to find the one you need, because the smart card will be able to serve for all of these purposes.
Although only recently introduced into the US, smart cards first saw general use in France in 1984. They are quickly becoming popular commodities and are expected to replace the simple plastic cards most of us currently use. Visa and MasterCard are leading the movement with their smart card technologies in the United States.
Although many parts of the world already use smart cards, their reach is still limited. Eventually the smart card will be available to everyone who wants one, but for the time being, it is mainly available only to those participating in special programs. Experts predict that internationally accepted smart cards will become increasingly available over the next several years, so keep an out for the chance to take advantage of this incredible new technology soon.