Saturday, April 23, 2016

Credit Card Chip System in the US: So Messed Up

Whether you got chips in your cards or not in the last few years, I'm sure you are aware of the painfully slow performance of the chip-based card payment system.  If you use the chip, if you're like me, you try to avoid using the chip since it takes an extra 20+ seconds. Even if you don't have a chip, I'm sure you've waited in line behind people who do.

We've all wondered why. It turns out, it's poor software.  Visa announced this past week that they will update the software with a faster implmenetion. And I quote:

An upgrade from Visa aims to shave a significant amount of time off this process. If Visa’s new “Quick Chip” upgrade — announced this morning — works properly, customers will no longer have to stand there awkwardly for 10-20 seconds with their card sticking out of the reader, waiting for approval. Instead, it would be more akin to the typical ATM experience, where the customer dips the card into the reader for only a second or two.
However, it's much worse than a simple question of speed.  Here's what's wrong:
1. We all prefer Apple pay. It's faster and more convenient and it's coming on fast.  Bravo to the credit card companies for totally blowing their dominance of automated payments by a slow late awkward implementation.
2. The chip system does not really address security very well. While it does move away from the incredibly easy to copy magnetic stripes, it does not fully implement what is known as the "chip and PIN" system used in all the countries in the world except for the US.  In all the other countries, there is both a chip and then the user must enter their PIN to maintain security. Most of the world implemented this.  However, the US  did not implement the PIn system since we felt it might be too hard on consumers so we remain with a sytem which is not so secure or advanced.
Why is the US doing it this way? It might be a problem of our economic system which is dogmatically private sector-oriented so the government cannot dictate a move to a higher security system.  So instead, the market is left to figure out how to move forward which means since nobody wants to show leadership, the low security system remains in place with the costs of fraud remaining incredibly high which of course, ultimately gets stuck back onto the consumer.

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