The new credit-card terminals started appearing in Publix Super Markets stores a few weeks ago with little fanfare. But the new smart-card terminals represent a big step for Publix and are part of a nationwide project to thwart credit card fraud with microchip-enabled cards.
There may be several years of transition for shoppers and merchants, but when the new systems are fully implemented, shoppers at every gas station, grocery, retail store and mall in the nation will need to learn how to use the new credit cards and start using a secret PIN with every purchase, much the same as debit cards require now.
Such “smart” credit cards are commonplace in Europe in everything from grocery stores to parking meters. People who travel abroad may have received a smart card from their credit-card company. (The chips are easy to identify by the silver pads on the card face.)
❖ ❖ ❖
To use the cards, shoppers feed them into new chip-enabled terminals, similar to the way they feed them into ATMs. The terminal communicates with the chip in the card and asks for a personal identification number from the shopper, who presumably is the only one who knows it. This two-step process is aimed at limiting the ability of a hacker or other crook to use stolen credit-card numbers on fake cards, which easily can be made with black market equipment.
The United States in general has lagged behind other countries in the transition to new cards, particularly because the changeover can be quite a transition for shoppers. For a time, a store can accept both smart and dumb cards for payment, but at some point the retailer can decide the time has come for a full transition and begin accepting only smart cards or some other form of payment.
The industry-backed Smart Card Alliance estimated there were approximately 120 million new microchip cards in the U.S. market at the end of 2014, with 600 million estimated to be issued by the end of 2015. MasterCard, for instance, expects to have at least 95 percent of transactions originate at smart terminals by October.
In 2011, Visa warned merchants that October 2015 would be the date for its “liability shift,” when whichever party handles a nonchip transaction “will be financially liable for any resulting card-present counterfeit fraud losses.”
“Today, about 37 percent of merchants have EMV-capable terminals installed,” said Randy Vanderhoof, executive director of the Smart Card Alliance.
The industry term “EMV cards” stands for Europay, MasterCard and Visa, which were among the first cards to make the transition.
That percentage “is expected to increase to about 59 percent by October,” Vanderhoof said.
Each time an EMV card is used for a payment, the chip in the card creates a unique code that cannot be used again.
Publix began the process of swapping out its credit-card terminals this winter, spokesman Brian West said. For now, the terminals accept cards with magnetic stripes, but the chip-reading feature is not turned on yet.
“We are upgrading our PIN pads to allow our customers the ability to use their chip cards once the installation is complete across all our stores,” West said. For instance, the store near downtown Tampa on Bayshore Boulevard doesn’t have the new terminals, but the Greenwise store that Publix operates in Hyde Park does.
Publix doesn’t have a date yet for when it will fully make the switch to smart cards or cards that use PIN codes, though West said that day is coming. As for mobile payment systems such as ApplePay, he said, “Mobile payment technology is still evolving, so we continue to evaluate which options will allow us to best serve our customers.”
❖ ❖ ❖
The transition to new cards comes at a time of upheaval in the credit-card world, as more merchants and independent vendors are jumping on a trend of using alternate credit-card terminals such as Square and the list of merchants breached by hackers grows with each passing week.
Merchants also are working to jump into mobile phone payments. Apple Inc.’s ApplePay system is taking off in popularity and is accepted by the likes of McDonald’s Corp., Panera Bread Co., Nike Inc., Office Depot Inc. and Whole Foods Market Inc.
With that system, phones wirelessly link up with credit-card terminals and employ a unique one-time-use code to connect the terminal, the merchant and the credit-card issuer to complete the transaction. Because the phones also use a fingerprint ID on the “home” button, the transaction offers another level of security against fraud.
“This is part of a long-term transition to ease people into using these safer more high-tech cards,” said Matt Schulz, a senior industry analyst with CreditCards.com. “For now, the bottom line is the machine at the merchant may look a bit different.”