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Credit card technology: 2012 and beyond

by Peter Andrew

There are 10 types of people in the world: those who understand binary and those who don't. If you fall into the first group, there's a good chance that you're a tech-savvy sort of person who's quick to embrace new technologies. If you're in the second, you may well be more conservative and cautious about devices that are driven by ones and zeroes. Either way, you need to know how, in 2012 and beyond, technological innovations are likely to affect your credit card use.

Credit cards with chips -- yummy!

When, in mid-December, Javelin Strategy & Research unveiled its pick of the top 10 trends in payment technologies in 2011, it put at the top of its list EMV, which stands for Electronic Money Validation. Nah, just kidding. It actually stands for the rather more boring and less descriptive Europay, MasterCard, Visa: the three companies behind the technology. EMV cards come with fingernail-sized chips (microprocessors) embedded in them, and these provide additional protections against fraud.

Credit card fraud's a big and growing issue in the United States. Back in June, Consumer Reports magazine quoted data from a 2010 survey by ACI Worldwide that found that 32 percent of consumers had been a victim within the previous five years. When the same question had been asked just a year before, that number was 27 percent.

Just how effective EMV is at countering card fraud is a matter of hot debate. However, in December, CBC News, a Canadian broadcaster, reported on that country's experience since the technology was implemented there. And it was told by police sources that they were "seeing fewer cases of counterfeit credit cards, and the force attributes the decline to new technology."

The likelihood of EMV arriving here was greatly increased during 2011 when Visa announced plans to incentivize merchants to buy terminals that are compliant with the technology. What difference would that make to you? Well, in virtually every advanced country -- and nearly all of those have used it for many years -- you have to tap in a four-digit personal identification number into a terminal when you make a card-present payment, which is why EMV is more commonly known as "Chip-and-PIN." However, Visa says that in the U.S. it's going to be up to individual credit card companies whether they insist on PIN use or allow customers to continue to sign.

Credit cards without the cards

The other big innovation in 2011 was the launch of Google Wallet. This was the first of what may turn out to be a number of similar products that all offer the same facility: payment using a smart phone or similar device instead of a traditional plastic card.

The idea is that you electronically link your credit card account to your smartphone, so money is deducted in exactly the same way as when you currently swipe your card. When you come to pay for something, you approach a near-field communications terminal, such as a MasterCard PayPass one, tap your PIN onto your device's screen, tap Go, and hey presto, the transaction's complete.

You won't need to have your card with you, you won't have to sign anything, and the payment's paperless (recorded electronically) so you won't even need one of those paper printouts that hang around in your wallet for months before ultimately being lost.

When The New York Times looked at Google Wallet back in September, it called the current offering "a crude, Neanderthal 1.0 version." But it looked forward to the bugs being ironed out, and new enhancements, such as the self-explanatory "SingleTap" option, being added.

Rewards credit cards -- from Big Brother?

You're either going to love this next likely innovation or absolutely hate it. It's another on Javelin's list of 2011 trends, and it's one that's already a big part of many organizations' plans, including Google's for its Wallet.

"Geolocation" could allow your credit card companies, using your smartphone, to know exactly where you are, every minute of every day. Presumably, you'd have to sign up for the services that flow from this, at the same time giving permission for each company to access this intensely intimate information. So why on earth would you do that?

Well, the benefits that you might receive could be considerable. To start with, you could always easily find your nearest ATM or bank branch. Once it knows enough about you, your credit card companies could also point you towards the nearest outlet of your favorite coffee shop, filling station or store chain.

But the real advantage comes with the special, location-based, promotional deals you could be offered, both on your rewards credit cards, and in the form of discounts from partner retailers. The New York Times described a possible future scenario:

...you might wind up walking down the aisles of Best Buy. If you've permitted it, the phone will know where you are in the store. It will know you're in the TV section. An offer will appear on your phone, offering $600 off a certain Panasonic TV if you buy in the next 30 minutes. You'll walk to the cashier on the spot, buy that TV and enjoy that savings.

Does that excite you or fill you with horror? That may partly depend on which of those 10 types of people you fall into. But either way it's highly likely that you're going to encounter all three of these technological innovations in 2012, or not long after.

Published 01/02/12 (Modified 01/05/12)


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