Want A Payment Card That Reprograms Its Own Mag Stripe? How About No Stripe At All?

Written by Frank Hayes and Evan Schuman
September 23rd, 2010

With lots of activity in the mobile payment and keyfob space, many have predicted the near-term demise of the rectangular plastic payment card. But at least two vendors are not giving up on wallet payment plastic without a fight.

Last Wednesday (Sept. 15), a Pittsburgh-based vendor called Dynamics unveiled a battery-powered device in the shape of a credit card that is capable of mimicking multiple cards by reprogramming its own magnetic stripe on the fly when the user hits a button to change accounts. Instead of replacing all of the credit cards in a consumer’s wallet, this device would instead sharply reduce their number.

This approach is reminiscent of a Japanese trial that, although it involved mobile rather than plastic, used a device that could store the CRM data from 100 retailers.

Meanwhile, First Gulf Bank in the United Arab Emirates on Tuesday (Sept. 21) launched what it calls an Internet credit card: No magnetic stripe, no embossed numbers; just a 3D secure password required to execute each transaction and a text-message alert to confirm it. The intent is for this card to be used only online. It simply wouldn’t work in an ATM, and the only way it could work in a brick-and-mortar would be for the associate to key it in.

This is the latest in a series of card experiments to try and address consumers’ fears of fraud. But it’s not just fraud. Some are worried that sites will either charge more than they originally said or make unauthorized—and oftentimes recurring—charges. These concerns have prompted experimentation with one-time-use cards, where the user sets aside only the dollars he/she intends to spend. If the retailer tries to charge more, the transaction simply won’t go through.

We still see the life for rectangular payment as very short—perhaps no more than 15 years, with dramatic reductions in less than 10 years and significant reductions in five years. But creative moves such as we’re seeing from Dynamics and First Gulf Bank will be essential to keeping versions of the cards alive beyond the true beginning of mobile payments.


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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