Visa International plans to test low-cost integrated circuits -- or "cheap chips" -- as a way to combat credit card counterfeiting.
Visa is considering a proposal by an unnamed supplier that would enable it to test the chips in France, where so-called smart cards, which use a more expensive form of the technology, are already in wide use, according to Roger Peirce, executive vice president.
Visa has been criticized in some quarters for opposing moves in the United States away from magnetic stripe technology, the prevalent standard for encoding data on cards. The cheap-chip proposal indicates that the association is keeping its options open in response to other regions, where smart-card technology is more prevalent.
Line of Antifraud Tools
Mr. Peirce unveiled the initiative, along with a series of previously announced antifraud tools that are being included in the association's
CardShield program, which was launched on Sept. 13. CardShield represents an effort to fold various antifraud efforts into a comprehensive program, with a dedicated staff and a multiyear budget, officials said.
Also in the package are the "card verification value," or CVV, program, in which numbers are added in the magnetic stripes of credit cards, and field tests of holomagnetic and watermark magnetics technology.
Verifying the value of cards has been credited with a $30 million reduction in counterfeiting losses.
Holomagnetics and watermark magnetics, seen as ways to combat "skimming' of the magnetic data by criminals, are due for field tests shortly.
Mr. Peirce said the cheap chips would cost about 50 cents per card, as opposed to several dollars for the higher-grade smart cards. Unlike true smart cards, the low-cost kind can't be used as an electronic purse, storing value until the consumer decides to use it. But it can contain a "handshaking protocol" that serves to validate a credit card at a smart-card terminal, Mr. Peirce said.
Added Flexibility
A worldwide system using cheap chips would be "quite a bit more expensive" than one using holomagnetics or watermarks, because smart card terminals would have to be installed in stores accepting the cards. But Mr. Peirce said the test in France means Visa will be prepared once the smart-card concept catches on.
The company took steps last year to integrate smart cards into its global technology strategy, to accommodate banks choosing to use them.
"It's going to take the industry five to 10 years to evolve to smart cards. In the meantime, the mag stripe will stay predominant," he said.
By including the cheap-chip program in broader package, a spokesman said, Visa allows members to tailor their cards to specific markets.
