U.S. banks have been reluctant to switch to a smartcard system
Following Wal-Mart’s announcement that it would add more secure smartcard, chip and pin payment capabilities to its stores, banking may be the next industry to adopt the change, according to FierceFinanceIT.com’s Jim Kim.
Smartcards, which use an embedded chip to process transactions, are generally viewed as more secure than traditional credit cards. They are used in many countries around the world, but have yet to reallu catch on in the U.S.
Kim says that banks have stuck with magnetic strip technology for multiple reasons, including the cost of conversion. He adds that financial institutions are not overly motivated to make the expensive change because they aren’t held liable if one of their cards is used fraudulently.
Many companies are also investing in advanced magnetic strip technology for use in existing credit card designs. Computerworld says that one such design would use information in the strip to create a digital fingerprint to help stop the use of counterfeit cards.
Analysts told the site that improving the strip would be a lower cost upgrade than switching to smartcards.
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