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How Smart are Smart Cards?

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You’ve heard the term “smart card” before. If you check the Wind River blog often, you’ve certainly read about them. There’s been talk here and there in the news about smart cards, and they’re starting to become more common in all sorts of places. In fact, you might have one with you and not even realize it.

What are they, exactly? “Smart card” is a general term referring to any card that has a microchip inside it. These microchips are very small (no more than a few millimeters across) and are used to store and process data. The data on a smart card can have all kinds of uses. They’re already in use around the US as smart phone SIM cards, student ID cards, employee security cards, and patient records cards in hospitals. They can store more information than a magnetic stripe card, and they can be encrypted to keep that information safe.

Plastic cards with embedded microchips may sound cutting edge, but they’re really nothing new. They’ve been used in France for telephone cards since the 1980’s, and most of Europe switched to smart debit and credit cards 15 years ago. The European payment industry adopted a standard called EMV (named after Europay, MasterCard and Visa) for their smart cards, and countries around the world are now issuing and accepting credit cards based on that standard. All told, there are more than 1.2 billion EMV smart cards in circulation. In the next few years, Visa and MasterCard want to add US credit cards to that number.

At checkout counters across the US, people pay by swiping their card’s magnetic stripe through a reader and then signing a pad or typing a PIN. The credit card terminal sends that data to a bank for authorization and the transaction is finished. This definitely gets the job done, but there is a lot of potential for fraud. Magnetic stripes can be secretly copied and “written” onto duplicate cards by criminals, and stolen cards can be used by faking the owner’s signature. These types of fraud were a serious problem in Europe before the introduction of EMV smart cards.

EMV cards are cost prohibitive to duplicate and store an encrypted PIN that must be entered when the card is used. It’s also much harder for scammers to get a card number off of the chip through a compromised card reader or skimming device. Some EMV cards still have magnetic stripes and the vulnerabilities that come with them, but all in all EMV makes life much harder for fraudsters.

Some issuers in the US are already sending a limited number of EMV smart cards to their customers. These cards are usually reserved for frequent travelers, but Visa and MasterCard are pushing for a more general rollout in the next few years.

This post only covers the very basics of smart cards and a little information about EMV. There’s a lot more to smart cards than we can cover in one post. If you have any questions, let us know in the comments and we’ll do our best to shed some light on the subject.

In the meantime, keep an eye out for credit cards with those tell-tale gold or silver contacts on the left side. Smarter cards are on their way.

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