Visa smart card technology almost ready for prime time

Visa U.S.A. Inc. yesterday announced that the development of hardware needed for point-of-sale (POS) systems to read the embedded chip technology in its smart cards has been completed. However, terminal software that's required before the smart cards can actually be read won't be available until late this year.

When the terminal software becomes available, several key merchant payment processors, including Vital Processing Services and First Data Merchant Services, will be able to offer smart-card acceptance applications on Hypercom Corp. and VeriFone Inc. terminal models. Visa said retail stores could be processing transactions with the smart cards within a year or so, after they've installed card readers.

Currently, only Foster City, Calif.-based Visa and New York-based American Express Co. are moving forward with smart cards. Unlike traditional credit cards, smart cards use an embedded chip that can be programmed to accept, store and send ata and is better able to stop card cloning and forgery.

Visa is betting that about 40% of brick-and-mortar merchants will replace their POS devices during the next four years because of outdated technology, said Patrick Gauthier, senior vice president for smart card applications at the credit card company, in a statement.

Theodore Iacobuzio, a senior analyst at TowerGroup, a research and consulting firm in Needham, Mass., said consumers will be quick to welcome smart cards once the technology is distributed among retailers. The sticking point until now has been that merchants will have to "foot the bill for any chip card rollout," he said.

According to Visa, merchants that pay up to $1,000 for new POS devices will have to pay only an additional $50 on average to ensure that their new devices are smart-card-enabled. The hardware and software combination should address "all of the issues external to a merchant that were barriers to [smart card] adoption," Gauthier said.

Visa's partnerships in the new technology include hardware, software and POS device suppliers that have the ability to accept smart-card-based payments, such as Phoenix-based Hypercom, Scotland-based Ingenico Fortronic Ltd. and VeriFone, a Santa Clara, Calif.-based division of Hewlett-Packard Co.

By obtaining EMV Level 1 and Level 2 approval -- EMV is the global chip card standard developed by Europay International, MasterCard International Inc. and VisaEuropay -- these vendors' device models are intended to ensure global interoperability when accepting EMV-compliant smart cards.

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