The change to the cards, "smart" chips

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–> 'Smart' Smart cards allow the user to keep the plastic in his possession at the time of paying in a restaurant, slide the card into a slot that reads the information on the chip. AP

NEW YORK – The next time you swipe your credit card at check-out, consider this: It's a ritual that the world considered obsolete and unsafe.

The United States is the only developed country that still cling to the credit and debit cards with magnetic stripe black. The rest of the industrialized countries has changed – or is in the process of change – the "smart" chip-based cards.

The problem with the black magnetic stripe on the back of a credit card is that it is as safe as writing the account information on a postcard: it's all outdoors and can be copied.

Card fraud and the measures taken to avoid charges U.S. merchants, banks and consumers billions of dollars each year.

Smart cards can not be copied, which reduces the potential for fraud. Smart cards with built-in chips can hide information that can be unlocked only with the right key. Because important information is hidden, the cards can not be replicated.

But the lines have been so ingrained in the vast U.S. payment system banks, payment processors, and retailers have failed to reach a consensus on the renewal form, leaving the U.S. behind the rest of the world.

"The card system in this country has been dysfunctional for a long time," said Mallory Duncan, general counsel for the National Retail Federation.

"We have far too much fraud because we have a very antiquated system of payment compared to the rest of the world. This is something that should have fixed long ago. "

Serious moves are afoot to change the conventional cards to smart cards in a few years.

Last month, Visa announced that it will give the policies of the U.S. banks a reason to issue smart cards and shops several reasons for accepting, from 2015.

Eric Schindewolf, product manager at Wells Fargo Smart Card Co., said Visa's announcement is a turning point.

"I think the U.S. has reached a turning point.'ll Start to see more and more smart cards in the hands of U.S. consumers," he said.

Smart cards are recognizable by the gold contacts size of a fingernail embedded in the side. Through the contacts, a chip inside the card can transmit information to a terminal when he slipped into a slot.

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–> 'Smart' chips are fingernail-sized gold contacts. A chip inside transmits information to a terminal. AP

So as a smart card works in practice: When is it time to pay the account in Le Gaspard de la Nuit, a small restaurant near the Place de la Bastille in Paris, the waiter brings to the table of a terminal wireless payment. The customer inserts his chip-equipped "smart" credit cards and enter their code of personal identification number on the keyboard.

Voila! The foie gras is paid by the card without removing the front of the customer, and the combination of chip and personal identification code number to maintain the safe operation of the fraud.

U.S. payments industry to date has been locked in a "chicken and egg" dilemma, Mr. Schindewolf said.

Stores had little reason to install smart card terminals, if banks do not issue, and apart from some contactless cards, banks do not matter, because the shops do not accept them.

Richard Sullivan, an economist in the research of payments in the Federal Reserve Bank of Kansas City, said that in 2006, 9 cents for every $ 100 you paid by credit card in the United States ended up in the pockets of criminals.

The figure for Spain was 2 cents.

Mr. Sullivan said the use of smart cards is a big reason for the difference. Other factors that play a role as well. The Spanish, for example, are less likely to shop online.

Javelin Strategy Research puts the amount of fraud on the basis of card numbers stolen in the United States of $ 14 billion. Fraud based on new card accounts created with stolen identities adds billions more – the total cost of identity fraud in the country is $ 37 billion.

Visa Movement occurs as industry experts warn that U.S. merchants become targets for fraud in other countries where payment systems and has tighter security. Because counterfeit magnetic stripe cards are now difficult to use in other countries, these criminals will probably send the letters to the United States.

This prospect is especially worrying as Mexico and Canada are adopting smart cards, experts say.

State of the United States as a haven is causing problems for travelers. Most shops and restaurants Europeans still accept magnetic stripe cards, but the standard credit cards do not work in Europe as automated kiosks that sell tickets for the Paris metro.

Some U.S. banks such as Wells Fargo, have begun issuing smart cards to customers who travel abroad.

Next year, Visa will begin this carrot dangling in front of the store owners: If you replace most of their terminals to accept smart cards that no longer have to have your payment, security system every year. U.S. Stores spend hundreds of millions of dollars a year for these audits, according to the National Retail Federation.

In an even more momentous change in 2015 Visa is changing the liability of a certain type of fraud from banks to stores.

The specific case is as follows: If a client presents a smart card in a store can not accept it, the store will fall back to using the magnetic stripe on the card.

If the transaction turns out to be fraudulent, the payment processor will be responsible, and in practice that tends to take the loss. Today, the bank would be responsible for the fraud.

The change means that banks have an incentive to make chip-based cards in the hands of their customers due to its responsibility for fraud is reduced when the cards are used. For its part, the stores will have a reason to install smart card terminals.

Javelin Throw, the cost of moving to chip-based cards for around $ 8 billion, mainly for the improvement of payment terminals in stores.

Officials of the world's largest retailer, Wal-Mart Stores Inc., said that smart cards can not come quickly enough.

They said they are frustrated with security holes in the current payment system and want to save money on card acceptance rates, which are inflated by fraud.

Wal-Mart has installed terminals with smart card slots in all its U.S. stores, and is working on getting the software behind the scenes work so you can start accepting payments.

It is also considered to be essential for the PIN code security system.

"The signatures are a waste of time," said Jamie Henry, senior director of payment services in the company. "They add no value to anyone."

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