What the Future Holds for Credit Cards

Throughout its long history, currency has adapted to keep up with the times and remain relevant in ever-evolving economic climate. And the credit card has formed the backbone of our cashless society.

In the wake of ATM hacking activity and an increase in the number of cases involving identity theft, the demand for new solutions to curb malicious intent is at an all-time high. But it’s more than just the card itself that needs improved security features.

Thought must be given to the infrastructure that has allowed credit cards to become such a ubiquitous form of payment. In America, the credit card system is currently undergoing an unprecedented $33 billion upgrade to chip-based smart cards.

But will that be enough? Experts think not.

The Changing Face of Credit Cards

A recent CNNMoney article outlines the new ways credit cards are changing and identifies the efforts of Oberthur Technologies, a French secure technology company in reducing credit card fraud.

As one of the last lines of defense against such activity, the company’s new prototype will see the CVV code randomized every 40 to 60 minutes via an ink screen display powered by a miniature lithium battery.

Unfortunately, a significant barrier threatening the adoption of the dynamic CVV lies hidden in the price. To be viable, it must catch on with the major banks – and this may prove difficult to achieve.

A single card will be 8 to 16 times more expensive for banks to purchase when compared to the latest EMV or chip-ased cards – a tough sell after the current upgrade.

Another concern with an alternating CVV code is it doesn’t address the need for multiple levels of security, nor does it fit with people’s preference to conduct mobile transactions from their phone or tablet.

While mobile applications will undoubtedly make things easier for consumers in the short-to-medium term, the sector tends to be reactionary and therefore tends to focus more and more on the problems at hand.

Additional Security Layers Lead to Solutions

Ultimately, methods of payment are tied to locality. For instance, the act of paying for an item online is entirely different to the way consumers purchase products or services when they’re within a physical store.

As a result, two-step authentication approaches – which require buyers to enter a one-time randomly generated password – seem to be rather unwieldy in the real world. This means they may not see as much use in the U.S. as they do elsewhere.

This has prompted the development of interactive credit cards featuring built-in mini computers, LCD screens and keypads that are capable of generating temporary passwords. They fill the role of ATMs somewhat in that they can display the balance, transaction history and more.

Once again, it’s up to the major banks to adopt the technology in order to make it mainstream. At present, only a handful of banks across Europe, the U.S. and Asia are offering these credit cards to customers.

A Revolution in Payment Terminals

Forward-thinking from financial institutions has resulted in the health care industry implementing new payment paradigms that provide a “future-proofed” payment terminal for medical facilities. It amends the fragmented experience many hospitals are forced to offer their patients.

Perhaps what needs to happen is a transition from outdated EFPOS facilities – regardless of whether they’re updated or not – to an entirely new payment paradigm.

The bench-top technology encrypts information sent between the bank and the terminal to allow for more secure transactions. This solution suggests that the credit card is here to stay.

Only with the benefit of hindsight will it become clear which way the world will lean, but when $33 billion is spent on overhauling an essentially effective way of paying for things, it’s difficult to see any future without plastic.

Anum Yoon is a personal finance blogger who started and maintains Current on Currency. You can sign up for her newsletter here.