Over the next several years most Canadian financial institutions will be converting their debit and credit cards to chip cards. This new chip technology promises advantages for both consumers and merchants.
Chip cards have an embedded microchip in them which stores secure information such as the clients account number and personal identification number. The information is on an encrypted format which makes it difficult to duplicate or access the information on the card without authorization to do so. When using automated banking machines the chip cards offer a higher level of security.
Chip cards can be used as a normal debit or credit card when making retail purchases. The cardholder has to insert the card into a chip reading terminal and keep it inserted throughout the transaction to confirm payment. Most credit cards will require a pin number be entered into the machine instead of using a signature for payment authorization. The card will also continue to have a regular stripe which allows the card to be used at merchants who do not yet have the chip technology in their machines.
Research has suggested that because of the chip technology, card fraud has been on the decrease worldwide. Chip cards also allow for faster checkout as they are said to be 15% faster than swiping the card. As a pin must be entered for credit card transactions, it reduces disputes and chargebacks for unauthorized purchases. Merchants can also benefit from chip technology. When a PIN replaces a signature the employees will no longer be responsible for cardholder identification. With a chip there is no need to manually search for signatures on payments taken and authorized referrals will be reduced. The whole world is migrating to chip cards and currently over 55 countries worldwide are using this technology.
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