This re-engineering of the backbone infrastructure will ensure all markets will have the capability to place chip terminals, Visa says. It is a huge commitment in terms of money and resources. Since the initiative's launch, he says, more banks are making a solid commitment to migration, as they now feel more secure about doing it. A chip card is a payment card carrying an integrated circuit or microchip which, when placed in a terminal, carries out a series of pre-programmed commands. Access to the chip's information and processing capability is determined by whoever designs and issues the card.
Unauthorized access is virtually impossible, reducing the risk of fraud.
But it's not just about combating fraud. Chips are expected to transform existing payment cards to allow multi-applications such as loyalty schemes and electronic banking to be added onto the card. They can be used as key factors in banks' customer relationship management strategies too. In fact, key equipment suppliers are predicting they will have phased out the manufacture of mag stripe-only reading equipment within the next two to three years. While there is obviously a lot of life left in the current equipment at the retail end of the market, this is as strong an indication as you can get that the mag stripe cards are reaching the end of the line.