Smart Cards and Credit

closeup of credit card with smart chip

More vendors are moving toward use of the smart chip inside of a traditional credit card. The smart chip has been used by the United States military for many years in ID cards and is finally seeing use as a commercially viable credit card.

These types of cards are known as smart cards and come with a host of additional benefits for shoppers as well as new payment processes that add convenience and security.

What is a smart chip?

The smart chip is a metal chip with integrated circuits that is embedded into the body of a plastic card. The chip communicates with card-reading devices to complete data transfer operations. It is backed by tamper-resistant security and works as a small computer with built-in tasks handling capabilities.

Most modern smart chips require contact to complete an electrical circuit for information exchange. However, contactless smart chips are being created that are activated by a signal from an antenna.

The smart chips has multiple applications in the civilian and government spheres, including.

  • Financial use
    Cards with smart chips can be used to communicate payment information, including bank account and routing information, to vendors.
  • Mobile communication
    Mobile phone manufacturers use smart chips for SIM cards that allow phones to connect to mobile networks across the U.S.
  • Identification
    Smart chips can hold information concerning a person’s identity, including personal numbers, accessible via a PIN for added security.
  • Security
    If the integrity of a smart chip is compromised, including by illegal use or tampering, it is designed to shut down operation.
  • Transit
    Ticketing and rider accountability can be recorded inside the chip to allow for fast, easy access to public transportation.
  • Education
    Identifying information for students enrolled in school can be held on ID cards that include a smart chip in the card’s structure.
  • Healthcare
    Patient information stored on smart chips is less vulnerable to tampering thanks to the chip’s built in security features.

The most popular of the smart chip’s modern applications is its use as a financial tool. Many shops and businesses in large cities are switching their payment processing equipment to include support for smart cards.

What are the advantages of a smart card?

  • Portability
    The size of the smart chip in the smart card means it can be carried in small containers anywhere you go.
  • Reliability
    Smart chips are unaffected by magnetic fields and resist interference from other communication networks.
  • Data Storage
    A single smart card can store bank information, medical information, identifying information and more.
  • Security
    Smart chips have built in security and failsafes so that information can only be accessed by those with a PIN.

What are the vulnerabilities of a smart card?

Physical Defects

The portability of smart cards is thanks to the smart chip’s small size and weight. When embedded in a card, the chip is vulnerable to physical wear and tear, and if a card is broken, the chip breaks along with it.

System Defects

Well programmed malware can override the communication directives that are built into the smart chip. Data communication can be modified via such means, but as smart chip technology evolves, so does security.

Most malware can only be installed via manual manipulation of the smart chip. Since the chip is tamper-resistant, those trying to install malware must work their way through several obstacles to take advantage of weaknesses in the smart chip. For the most part, the effort is never worth the payoff for criminals.

Are smart cards the future of credit processing?

Since large businesses are seeing a rise in smart card use and major banks have started automatically switching new cards to smart cards, it is likely that smart chip technology will become the future of business transactions.

Smart cards will bring a new layer of accessibility to both small and large businesses, and the consumer will benefit from faster, more reliable, and secure transactions.

Leading through intentional change.


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