Currently, the US is one of the countries that still using the outdated credit card, which uses the magnetic strip to do transactions. The other countries are already using a chip-based card that would make transacting harder for fraudster.
The problem with the magnetic strip is that it can be easily copied since most of the information can easily detect. The information installed on the magnetic strip has no protection. A common hacker can detect the information easily. Each year, card frauds cost the US merchants around billions of dollars.
The smartcard is different since the information hidden in the hip can not be copied, reducing the potential threat of card fraud. It is said that the smart card is the equivalent of a safe that could store valuable things in real life. Since the pertinent information now hidden in the chip, such information can not be copied.
However, the problem is that the magnetic-card strip widely used all over the US. It would be harder to replace it with the new chip=based card. Both retailers and consensus failed to do some overhaul on the cards, which leaves the US behind the rest of the industrialized countries.
General Counsel of the National Retail Federation, Mallory Duncan says the card system in the US has been dysfunctional for a long time now. The country now had a many-fraud transaction since the payment-system now outdated.
Over the years, many companies were trying to switch from the conventional cards into the smart cards.
Just last month, the US issued a policy, which is going to require all the banks to replace the conventional cards with the new smartcards. They hope that, by 2015, the conventional cards already wiped out from the US.
Product manager for smart cards at Wells Fargo & Co., Eric Schindewolf says the Visa announcement is the turning point.
Since the country had been using the conventional card for the longest time, US gives away around 9 cents to criminals for every $100 that a person spends on his card.
Javelin Strategy & Research assumed that the amount of fraud based on stolen card numbers in the U.S. is $14 billion. Fraud based on the new-card accounts made using stolen individualities adds billions further — the whole cost of identity fraud in the country is $37 billion.
The move of Visa only comes from the experts belie that US is the target of most hackers from the countries that already switch to smart cards.