Advance commerce through innovation

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Advance commerce through innovation

Smart cards make perpetrating fraud considerably more difficult than "traditional" magstripe cards. In regions where offline processing is the dominant method for processing transactions this especially is true. As a result — and even though we have driven payment card fraud to an all-time low — our industry is now seriously exploring how smart card technology can become the primary driver in the evolution of payment card security.

The offline world is not the only place where smart cards can enhance security. With consumer online banking and ecommerce in general on the rise, the industry has been moving quickly to implement solutions that include stronger authentication. Smart card technology has been at the heart of that movement, creating a truly unique transaction environment through the use of dynamic, computer-generated codes that keep a user’s information safe and secure.

Smart card innovation comes with other advantages, too. By virtue of the ability to store an array of data on the card, the technology offers numerous advantages to merchants and customers. They eliminate the need for signature identification, as well as the need to manage, store or retrieve paper slips. Smart-card transactions are faster than magnetic stripe transactions and can take as little as two to three seconds to complete payment. In addition, smart cards allow merchants to launch customer loyalty programs and generate discounts and special offers targeted directly toward individual purchasing practices.

The success of smart cards in France and other parts of the world cannot be denied. The challenge facing the payments industry today is determining how to foster such change in all our key markets. The payoff — additional security, quicker checkouts, true one-on-one marketing — is well worth it. That is why we must continue to be vigilant and open-minded, exposing ourselves to innovation going on outside of our immediate purview. This means participating in cross-industry conferences and forums that lead to true, global collaboration. It also means soliciting the involvement of all of your stakeholders to build the next generation of your security strategy — internal stakeholders as well as customers and partners.

One day, with the help of smart cards and similar technologies, the payment card industry will evolve past the threats we face today. I envision a time when, through the creation of a unique transaction environment, we will render payment card data worthless to those wishing to commit fraud.

As with the magnetic stripe, smart card technology represents the continuous evolution of the payments industry and is testament to our commitment to the innovation that has created one of the safest and most secure payment methods available.


In 1974, MasterCard was the first to recognize how magnetic stripe technology benefited the transportation industry, and standardized the practice of placing the magnetic stripe on the back of credit cards to store necessary data to process transactions.

Roland Moreno, the French inventor of smart card technology, predicted in 1974 that smart cards would replace checkbooks within three years. A few decades later, Mr. Moreno's prediction is taking hold in many parts of the world, says Chris Thom, MasterCard.

In 1988, France Telecom integrated smart card technology in its phone cards. The practice was then instituted by other telecommunications companies across Europe. And just a few years later, France mandated all payment cards move to microchip technology.

Thom says, "We have witnessed how well smart cards have worked in France. Following rollout in 1992, France's payment card fraud rate decreased nearly tenfold — falling from 18 basis points to around two basis points — and this level has been maintained subsequently.

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