The Interac Association has kicked off its chip and PIN technology rollout plan, which aims to completely eliminate magnetic stripe debit transactions in Canada by 2015.
The news comes after members of the payment card industry – including Interac, MasterCard Canada Inc., Visa Canada and many of their respective card issuers – announced the completion of Ontario’s Kitchener-Waterloo chip and PIN trial and its success among merchants and consumers.
The new verification technology will replace the traditional need for signature verification in credit card transactions.
Caroline Hubberstey, director of communications at Acxsys Corp., the company behind Interac Direct Payment, said the Kitchener-Waterloo trial proceeded smoothly and received strong support from both merchants and consumers.
“We’re not like some other jurisdictions which use signature-based debit, so the change isn’t as jarring to consumers,” she said. Rather than swiping their cards through debit terminals, customers will now be required insert their cards into the machines and leave them in the device while they enter a PIN.
The use of encryption algorithms between terminal and card is extremely difficult to reproduce, Hubberstey added, and provides the biggest benefit over magnetic stripe transactions.
“The EMV chip is like a mini-processor on the card,” she said. “With mag stripe we’re seeing 99.9 per cent of transactions occurring without incident, so this is really making a safe payment system even more secure.”
According to poll of 402 Kitchener-Waterloo residents conducted in July, 88 per cent of respondents said the chip cards were as easy to use as existing magnetic stripe ones. In September, another poll of 200 area merchants found that 75 per cent of front line employees consider chip transactions as easy or easier than magnetic stripe transactions.
While each financial institution has their own timetable to issue cards and convert ABMs, wide scale Canadian deployment is expected by 2010. For Interac, magnetic stripe transactions will no longer by accepted at Automated Banking Machines (ABMs) after 2010 and at store terminals after 2015.
“Mag stripe transactions won’t be happening after 2015 – that’s the end date,” Hubberstey said. The magnetic stripes will continue to be on the card for the migration period, however, to allow Canadians who are travelling to be able to use their cards in countries that have yet to migrate to chip, she said.
Hubberstey added that mag stripes may exist on debit cards beyond for the same reason.
The biggest complaint about chip and PIN has not been about the technology itself, but rather the hardware and software costs involved in the migration for some merchants. But according to Alain J. Cusson, senior vice-president at research firm Harris/Decima, the Interac timeline should be more than sufficient for every retailer.
“A good rollout period is about five years,” he said. “Consider the lifetime of a terminal. It’s used by a lot of people and the parts break down and get worn out. Retailers don’t want to change a terminal they just acquired a year ago, but they often have to change after about five years.” For Cusson, the move to chip and PIN will ease the pressure on both retailers and consumers.
“Anyone can do a signature, I’m not able to sign twice the same way, so how can the drug store cashier look at my signature and verify me,” he asked. “And for consumers, now you have to have your card actually stolen [to be victimized]. With the magnetic stripe, you can have it copied and then given back to you.”
The technology could also save a lot of literal wear and tear on some consumers’ wallets, he added.
“Chip technology could reduce you down to one or two cards,” Cusson said. “Good multi-application software on the chip may offer real estate for banks to offer to their partners. So instead of having separate Aeroplan, HBC, Visa and debit cards, I can add all these applications to one card.” The biggest issue in all of this, he said, will be branding. “Air Miles would like its logo on your card, but Visa may just want its logo on your card,” he added.