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Are Changes to Credit Cards on the Horizon?

May 16, 2014
Credit Card Basics, Credit Cards
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It’s always exciting to wonder what the future holds: Where will you live? Where will you work? How will the world be different?

If you’ve ever thought about how technology will change in the future, you’re not alone. The Nerds don’t have a crystal ball, but we have a few guesses about how credit cards are likely to change – and technology plays a big role. Interested in our predictions? Take a look at the information below.

Why do credit cards need to change?

Most products evolve over time. Consumer preferences change and technology improves. But why exactly do credit cards need to change? After all, they’ve been serving Americans well for more than 50 years, with very few modifications.

For one thing, security is a major concern. The 2013 retail data breaches exposed how vulnerable our credit cards are to fraud and theft; in fact, the United States leads the world in credit card fraud. Worries about how safe our personal information is with our current cards is a driving force behind designing better plastic.

Another reason that credit cards will have to change is the explosion of mobile technology. Smartphones and tablets have taken the world by storm, and many consumers want to transition to using their mobile devices for all their daily activities – including paying for stuff. Today’s credit cards are convenient, but probably not as convenient they could be.

Say hello to chip technology

The credit card of tomorrow is going to be much safer to use, due to one big change to plastic technology in the U.S.: chip technology. That’s right, the little strip on the back of your card – which stores your card’s data – will soon be joined by a computer chip. This new technology is much more difficult to hack than the magnetic strips most of us use today.

Chip cards are already widely used in other parts of the world, but by October 2015 they’re expected to be commonplace in the United States as well. This is because a major liability shift is in the works. Currently, credit companies absorb most of the costs when fraud occurs. But in October 2015, this will change. If a credit card company has provided customers with chip-enabled cards, but a merchant hasn’t upgraded its payment terminals to accept them, it will be the merchant’s responsibility to pay up if fraud happens. This is why most experts predict that chip cards will predominate by the end of 2015.

How will chip technology change your experience using your card? Very little, actually – instead of swiping your card through a payment terminal, you’ll insert it into a machine that’s capable of reading the chip. The machine will spit the card out when your transaction is complete, and you’ll be on your way.

This might seem like a small change, but it’s likely to have a big impact on your data security. That’s something to look forward to!

Will credit cards even be cards anymore?

While the introduction of chip cards will be a game-changer when it comes to data safety, more profound shifts in how you use your card are expected, too. In fact, in a few years you might not be using a physical card at all.

Entrepreneurs around the world are developing technology that will allow you to use your smartphone as a payment device – no plastic required. Sometimes referred to as mobile wallets, these systems use mobile applications to store the payment information of all your cards — credit, debit, store loyalty, etc. Then, you to use your phone as a payment mechanism. This provides an added layer of convenience.

The great news: There’s no need to wait for this technology – it’s already here. Google Wallet, Isis, and Square Wallet are just a few of the mobile wallets already in operation. However, some aren’t universally accepted yet. Some don’t allow you to load every type of credit card onto your phone, and others aren’t able to be used at existing payment terminals.

An exception to this is Loop, which hit the scene in February 2014. Loop allows you to swipe all your cards into its app, but unlike most other types of mobile wallet, it’s compatible with most (over 90%, according to the company) existing credit card payment terminals. You simply touch your phone to the merchant’s credit card reader to complete your transaction.

The Nerds reached out to Loop and asked how the company is working to change our credit card payment experience. Jennifer Ni, Loop’s vice president of product marketing, told us that:

“Instead of pulling out a wallet and fumbling for a card to swipe, they [consumers] now can simply hold out their phones (or other mobile devices) to quickly pay. We digitize physical cards into a smart phone and turn the smart phone into a smart wallet. That is a future way and fun way to pay. When you leave the house, you check for your key, wallet and phone. Imagine with Loop, you can confidently leave the wallet behind.”

It’s hard to say how long it will take for mobile credit card payments to become the standard. But given the popularity of smartphones, we predict that using a mobile device – rather than a piece of plastic – will be the norm within the next few years.

The takeaway: The credit card of the future is slated to address two major concerns – data security and convenience. This is why the Nerds think tomorrow’s card will be chip-enabled and integrated into a mobile payment system. Only time will tell, but we think the credit card of the future will be a big improvement over what’s in our wallets today!

Futuristic card image via Shutterstock