Although long used across the Atlantic, smart credit cards didn’t make their debut in the United States until 1999, with the American Express Blue card. The card used a smart chip rather than a conventional magnetic strip and promised less check out time than traditional cards.
However a recent report suggests old-fashioned magnetic strip credit cards may offer key advantages over smartcard technology.
Magnetic cards offer increased security advantages because they connect to mainframes at the time of purchase, conducting fraud analysis in real time. By keeping the cards centralized, changes can be made throughout the network instantly, according to the New York Times.
By contrast, Jim McCarthy, a senior Visa executive, told the Times, a security upgrade would mean replacing each of the company’s smartcards.
Smartcard readers, which allow users to simply flash their card for purchases, are rare. Only 600,000 point-of-sale terminals currently exist in the U.S., compared with about 13 million magnetic strip readers, the news source reports.
Under the current magnetic strip system, which debuted in the 1970s, credit card fraud losses have fallen from 20 to 22 cents for every $100 charged, to 6 cents per $100 today.