Visa 'smart card' technology almost ready for use

Visa U.S.A yesterday announced that the hardware and software needed for point-of-sales (POS) systems to read the embedded chip technology in its smart cards is now available, and said bank card processors supporting 80 percent of Visa's card volume can now process smart card payment transactions.

The advances in technology mean retail stores could be processing transactions with the smart cards within a year or so, after they have installed card readers. Currently, only Foster City, Calif.-based Visa U.S.A. and American Express Co. in New York are moving forward with smart cards. Unlike traditional credit cards, smart cards use an embedded chip that can be programmed to accept, store and send data and is better able to stop card-cloning and forgery.

"Through this initiative, Visa Member financial institutions and partner merchants are now able to offer 'bricks and clicks' smart card services," said Patrick Gauthier, senior vice president for smart card applications at Visa U.S.A.

Visa also announced that terminal software applications will be available for delivery late this year. That means several key merchant payment processors, including Vital Processing Services and First Data Merchant Services, will be able to offer smart card acceptance applications on Hypercom Corp. and VeriFone Inc. terminal models.

"We have addressed all of the issues external to a merchant that were barriers to merchant adoption," Gauthier said.

Visa is betting that about 40 percent of brick-and-mortar merchants will replace their POS devices during the next four years because of outdated technology, he said.

Theodore Iacobuzio, a senior analyst at TowerGroup, a research and consultant firm in Needham, Mass., said consumers will be quick to welcome smart cards once the technology is distributed among retailers. The sticking point until now has been that merchants will have to "foot the bill for any chip card rollout."

Gauthier said merchants that pay up to $1,000 for new POS devices will only have to pay out, on average, an additional $50 to ensure their new devices are Visa smart-card-enabled.

Visa's partnerships in the new technology include vendors of hardware, software and POS device suppliers that have the ability to accept smart card-based payments, such as Phoenix-based Hypercom, Ingenico Fortronic Ltd. in Scotland, and VeriFone, a Santa Clara, Calif.-based division of Hewlett-Packard Co.

By obtaining EMV level 1 and level 2 approval -- EMV is the global chip card standard developed by Europay International, MasterCard International Inc. and VisaEuropay -- these vendors' device models ensure global interoperability when accepting EMV-compliant smart cards.