MONTREAL — Digital technology is putting the power of a computer onto credit and debit cards to help cut down on fraud. Cards are being embedded with a microchip, or a tiny computer. That means the traditional swiping of a credit or debit card and signing a credit card slip won't be necessary.Visa Canada, MasterCard Canada Inc. and Interac Association are moving to bring Canada in line with card technology that's already in use in much of Europe and parts of Asia and Latin America.
"The key driver for this is really on the security side," said Michael Stephenson, Visa's senior business manager of the chip initiative.
The three are involved in a pilot project in which credit and debit chip cards are being tested at businesses and financial institutions in Ontario's Kitchener-Waterloo region, west of Toronto.
Quebec-based financial institution Desjardins is leading a test in St-Jerome, north of Montreal. It's expected that Canada will move to chip technology over the next three years or so. However, the magnetic stripe is expected to remain on some cards to allow them to work in jurisdictions where chip technology isn't available.
Some test results have shown that transactions with chip cards are 40 per cent faster, Stephenson said. Instead of cards being swiped, shoppers insert them into a small chip-reading terminal.
Consumers using chip cards need to type in a PIN number when making a purchase instead of signing their names. If a card is lost or stolen, a thief shouldn't know an individual's PIN number.
Client information on a card's magnetic stripe can be copied by fraudsters to make fake credit cards, causing millions of dollars in losses to businesses and financial institutions.
Jack Jania of international digital security company Gemalto said it is more difficult to copy a chip card because the data and the transaction are encrypted. This brings a higher level of security to a transaction, said Jania, vice-president and general manager, secure transactions, for Gemalto in North America.
Gemalto is known as the world's largest provider of smart cards and develops operating systems for the cards. It's involved in the Canadian project to help implement the international standard known as EMV (Europay, MasterCard, Visa) standard.
"There's a secret key inside the computer chip that makes that card unique," said Jania, who's based in the Austin, Tex., area. Jania said the chip card randomizes how things are stored in its memory. He also warned: "If you try to pry open the card and take it apart, you expose the device to light and it automatically dumps its memory." The chip is encased in "very hard black epoxy" and will be damaged if taken apart, he said. "It's designed to be extremely tamper-resistant to ma\ sure the inherent data that's in that little computer is secure."
Waterloo Regional Police Staff Sgt. Wally Hogg said while it's too soon to say what impact the chip cards have had, it will be difficult to extract information from them. "There shouldn't be any concern about having the card double-swiped," said Hogg, who's in the fraud branch.
Interac Association's Kirkland Morris said consumers shouldn't have any privacy concerns about the switch to chip technology, but the move will take time.
"All of the debit and all of the banking machines have to be upgraded or replaced to chip (technology) before the end of 2012," said Morris, vice-president of enterprise strategy. "And all of the merchant terminals have to be upgraded by 2015. It's absolutely a multi-year exercise."
MasterCard Canada's Oliver Manahan said France was the first country to move to chip technology about 18 years ago and its fraud rates fell to almost zero. "Here's technology that can be used for the greater good of protecting payments and keep money out of criminals' hands," he said.
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