The Latest Changes To Cards: EMV Technology

sliding cardThe nationwide rollout and mandate of authenticated EMV chip-card transactions has just passed its official deadline of October 1st, 2015. This massive transition to the new way of processing debit/credit card purchases is one of the largest changes consumers and merchants have seen in decades. Let’s briefly take a step back in time to see how things have progressed throughout the years!

The concept of exchanging goods through credit has been in work since the late 1800s, where consumers would use credit coins or charge plates as currency when buying goods from a merchant. Fast forward into the next century and we started to see department stores issue their own in-store cards that would only work at their specific store and this concept still continues today with mass popularity. Transitioning onto the freedom of making purchases wherever a card was used, was the “Charg-It” card introduced in 1946 from Briggins’ Bank (an old defunct bank originally based in Brooklyn). However, there was a catch when using it; the “Charg-It” card could only be used locally and by customers who had an account at the bank.

Plastic credit cards and charge cards debuted in the 1950s and American Express was notably the trendsetter of the card revolution. Within the first five years of them introducing local currency credit cards in the US and abroad, nearly 1 million cards were being used at approximately 85,000 establishments. Originally, card holders had to settle their full card bills at the end of each month, which was functionally called a ‘closed-loop’ system. But, nearing the end of 1959, the option of a revolving balance was available, which allowed card holders to no longer pay off their entire bill at the end of each billing cycle. This opened the door to the accumulation finance charges and allowed consumers to manage their money with more flexibility.

As time continued, other major banks joined the credit card/bank card revolution and that eventually lead to what we are familiar with today. While the methods of processing a transaction has varied throughout the years, we’ve come all too used to swiping our cards through a point-of-sale terminal where our card information is authorized through the magnetic strip and PIN numbers/signatures. However, that brings us to this new EMV authorization process that’s now the new and improved way of making purchases at a merchant.

The EMV technology is a special chip that vastly improves the security of cardholders and makes it much more difficult for thieves to steal consumers’ card information. While only 40% of consumers have received their new EMV chip-enabled cards, merchants are having a hard time accommodating the new payment method because it requires a point-of-sale terminal upgrade. This upgrade can be quite expensive for smaller merchants and mom-and-pop shops because some EMV terminals can cost upwards of $1000 or more. This is making some establishments go with the option to buy ATM machines rather than accepting card transactions until they can afford these new terminals.