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Your credit card is about to take the next evolutionary step

“Apple Pay” is not how teachers are paid or a way to keep doctors away. “Chip and PIN” is not a local pub. EMV is not an online version of the DMV. They are, however, all affecting how we in the United States deal with credit cards. The way we pay for things is evolving; we are in for some massive change, much sooner than you might think.

Their demise has long been called for, and may be here. Swiping to pay with your credit card? That will be mostly gone in six months.

I am, by the way, intrigued and concerned. “Paper” is going away—signatures with pen on paper are going away. Mag stripes are going away. Technology will be the foundation. We take our cell phones to the gym, to the beach, places we may wish we didn’t have to take a wallet.

But my cell phone’s battery has been close to dying multiple times just before having to show a mobile boarding pass for a flight; my identity and ability to pay can’t be contingent on juice in the cell phone, let alone cell signal or Internet availability.

Relying on my memory to unlock my credit card at a time of distress? Even worse! Until biometrics or another foolproof method of identification better than remembering login names and passwords comes along, I fear that I will not remember all of the PINs for my payment cards.

Cash, check, credit card: What could be more foundational to the way we in the United States pay for things? We use cash for broad simplicity, ease and anonymity; we use checks and credit cards for an audit trail and better proof of payment, as well as access to larger amounts on demand. The smallest operator can deal with the first two; with devices you can add to your smartphone, anyone with that technology can accept the latter as well.

Cash is still with us for now, with its obvious vulnerabilities. As for checks, the paper ones are definitely an endangered species. You can give your banking information to a vendor or instruct your bank to make payments, and they can use electronic funds transfer. Even if you give or get a paper check, you can take a picture of it for deposit—wait a minute, why are we involving the paper in the first place? Banks in Finland stopped issuing personal checks in the ’90s and continue to work on a real-time economy (http://conference.rte.fi/). “Checkless checking account” is not an oxymoron; why is KeyBank’s Hassle-Free Account hassle-free? “There are no paper checks on this account.” Many stores feel “cash or credit only” minimizes their hassle as well.

Let’s turn our focus to credit cards.

On the rare opportunities I get to travel overseas, the differences between how we in the United States handle credit cards and how Europe handles credit cards becomes very clear. Paying for dinner at a restaurant is a great case in point. At a fancy restaurant here, they bring the bill on a tray or in a folder, upon or within which we lay our credit card. The wait staff whisks our card away and then returns shortly afterwards with what we hope is the only charge slip they created, onto which we add our John or Joan Hancock. We separate our customer and merchant copies and go off on our way. In contrast, in Europe, they bring a small wireless terminal with a slot that can read a computer chip on your credit card. Like an ATM, the device has a keypad; you enter your PIN, the device prints a final receipt and at no time does the card leave your person.

Those chips, as opposed to the magnetic stripes prevalent in the United States, are a bit more difficult to “skim” (where clever people have found ways to put their own magnetic card readers on top of the vendor’s magnetic card readers at gas stations, ATM machines and other less monitored places). For that reason, I was thrilled when I received a new card for my work with a computer “chip.” I looked through all the documentation for my PIN, but found none; I went online and found that a PIN was not yet supported. I still had to sign. I had not joined the PIN elites.

That’s about to change. First, it appears we have a choice: Back in October, President Barack Obama signed a new Executive Order, and opening the path for chip and PIN was high on the list. Second, vendors seem to not have so much choice: merchants who don’t move to support for the chip and away from the magnetic strip will incur the risks currently borne by the credit card company. Most merchants will have to make the change by this October, while gas stations have two more years.

The chip and PIN card is sometimes called EMV card (Europay, Mastercard and Visa). Somewhere in between the magnetic stripe and the chip is the Radio Frequency ID care. You may have one—they have a little logo that looks like a WiFi signal. The advantage is you don’t swipe them, you tap them. A decided disadvantage is that a bad guy getting the information from an RFID credit card has an even easier time than getting it from magnetic stripe.

So, what can we do to make those credit cards even easier to use and harder to steal from?

That’s what Apple Pay and other similar offerings from Google, Paypal and others promise. The vendor never sees your personal information, only an OK from the bank. You are protected by fingerprint or PIN. The technology separates the banking information physically or logically from the other stuff on your phone. With a wave of your phone, you can pick from all of your credit cards (or gift cards and loyalty cards) and keep your wallet or purse away from others. Yes, you need to have your phone or appropriate device with you and turned on; you may need to have connectivity. And bad guys will find a way around it.

The wallet may be a thing of the past. One major milestone is October of this year. Pick your PINs now, while the pressure is off.

Eric E. Cohen, CPA, of PwC, is spending his time reinventing how accounting information is shared, with XBRL International.

3/27/15 (c) 2015 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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