Upgrade will ultimately replace magnetic strip

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BY ALAN COCHRANE
TIMES & TRANSCRIPT STAFF

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The next time you get a debit card from your financial institution, it could look a bit different as it will likely include both a black magnetic stripe and a built-in computer chip.

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photo contributed

This fall, financial institutions and retailers will begin to use new debit cards and readers equipped with computer chip technology. The Interac association says the new computer chips offer consumers and businesses more protection against debit card fraud. The only real change for consumers will be that instead of ‘swiping the stripe’, they will insert the card into the reader and leave it there until the transaction is complete.

photo contributed

This fall, financial institutions and retailers will begin to use new debit cards and readers equipped with computer chip technology. The Interac association says the new computer chips offer consumers and businesses more protection against debit card fraud. The only real change for consumers will be that instead of ëswiping the stripeí they will insert the card into the reader and leave it there until the transaction is complete.

New chip cards -- along with the automated tellers and millions of card readers in stores, restaurants, hotels and other businesses across the country -- will start appearing over the next several months. But officials with Interac say customers won't really see much of a difference. The only real change will be that consumers will no longer "swipe the stripe." Instead, they will push their card into a reader and leave it there until the transaction is complete. You will still need to know your PIN number.

Interac Direct Payment has really caught on in Canada over the last 10 years. Under the system, customers can use their debit card to pay for groceries, gas and just about anything else in the economy. When paying for goods or services, the customer enters his or her personal identification number and says OK to the transaction and the money is automatically debited from their bank account. The system can also be used by consumers to withdraw cash from their account 24 hours a day. The system is managed by Interac, a non-profit co-operative of financial institutions, merchants and technology companies.

Interac says the new chip card technology will bring enhanced security and greater convenience to customers. The microchip built into the card will give it the ability to store and process data and provide better security than the black magnetic stripe. The chip card technology is based on a global standard now in use around the world.

"This technology is already in place around the world in main parts of Europe, Asia and the U.K.," says Caroline Hubbertsy, a spokeswoman for the Interac Association, a non-profit co-operative of financial institutions that administers the use of debit cards and transactions in Canada. "In the places where it has been implemented, debit card fraud fell dramatically. It's just another step that the industry is taking to make debit cards even more secure."

Beginning this fall, members of the Interac Association will begin to distribute the chip debit cards to their customers. As well, members will continue to replace Automated Banking Machines (ABMs) and retail terminals with chip-enabled devices, including gas pumps that offer direct payment. Each financial institution and payment processor has its own timeline in place for the distribution of cards and terminals across Canada, so introduction of chip technology will vary from one organization to the other.

Hubbertsy said the change is being done over an extended period of time so financial institutions and retailers won't have to spend extra money to upgrade equipment. Instead, they can wait until their next regular upgrade and put in new equipment at that time.

The debit cards will look almost identical to current cards, except they will have a logo and brand name of the InteracChip. The computerized chip will hold the customer's information and interact with the card readers at retailers and ABMs to solicit payment from the customer's bank account.

Interac says it could take several years for the chip technology to be fully integrated into the economy, but most of us will see it by at least 2010.

"Magnetic stripe transactions will no longer be accepted at ABMs after 2012 and at store terminals after 2015," Mark O'Connell, president and CEO of the Interac Association, said in a news release. "These timelines will ensure a timely transition while also ensuring a smooth transition for our members and our merchants."

The association says there are 35 million debit cards in Canada, 603,248 terminals, 55,562 ABMs, and 410,324 merchants using the card readers. According to Interac, Canadians are among the world's most frequent users of debit cards with 128.4 transactions per person. That's a close second to the people of Sweden, who have 132.7 transactions per person.

The computer chip will eventually replace the magnetic stripe, but cards will continue to be issued with the black stripe. This is mainly because the United States has not yet made a commitment to computer chips and people from Canada travelling to the U.S. and other countries would not be able to use their debit cards if they had a computer chip only. Travellers who are leaving Canada and planning to use their debit cards would be wise to check and see if they will be accepted in the country they are visiting. But the chip technology is spreading. Interac says there are already 622 million chip cards around the world and 8.2 million terminals that accept them.