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Smart Cards are also known as Chip Cards, Integrated Circuit (IC) Cards and EMV cards while another implementation, Chip & PIN Cards, additionally require the cardholder to provide their personal identification number.

Smart cards are a great concept, and they are pretty reliable when it comes to fraud prevention. Currently there are sporadic card issuers with smart cards, such as the American Express Blue Card. But for the most part adoption is still very low in the U.S.

The biggest downside of the smart card is the required reader to check the chip. Until the time comes that a chip reader can be put on all computers, phones and terminals this technology will be slow to be adopted. To the consumer, there really is no incentive to use this technology unless they are simply “scared” of having the card or number stolen.

The fact is most merchants are not set up to handle these cards either and they are simply using these as normal credit cards in their process, thereby stripping any fraud-prevention value the technique may have offered.

Smart cards:

Are good for preventing counterfeit cards.

Rely on a physical card reader to work the secure check.

Work like a normal card when no reader is available.

Are highly adopted in Europe and are expanding in Asia, but are rarely used in the United States.




Alternative SolutionsConsumer authentication

Building this In-House - N/A

Estimated Cost - Low to High

Sample Vendors - Gemalto


Smart cards have implanted chips that can be read by specialized devices to authenticate that the card is authentic. They don’t authenticate the consumer, they authenticate the card is real. Some implementations called “Chip and PIN” actually use the combination of a chip to authenticate the card and require consumers to enter a PIN to authenticate themselves.

Key considerations when implementing or buying this functionality include:

  • Make sure your processor supports the services

  • Make sure you can get card readers for the consumers to actually use their Chip cards correctly


The issuing bank issues a branded credit card that has an embedded chip that is unique. When a consumer makes a purchase, and the merchant has a specialized reader that can read the chip, the chip and mag strip data is checked when the card is swiped.

Readers are available for card-present transactions and for computers. Some issuers actually send out a card reader to the consumer with the card. The basic use of the card is the same as a standard credit card; the chip is just a means to make sure the card is authentic.


If the consumer can authenticate via the smart card, then you would accept the order. If the consumer cannot authenticate, you would reject the order. If a consumer comes in that is not using the reader you will need to have processes in place to catch fraud with these orders.

If you support this type of solution you should also set up a process to confirm a card is not supposed to be using a reader. This will prevent you from processing an order for a consumer that had their card stolen, and is being used fraudulently.

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