What Are Smart Credit Cards, And How Do They Work?
Payment alternatives such as the ever-more-popular Google Wallet and its competitors like Apply Pay, Samsung Pay, and Android Pay are all focusing on the mobile device as a payment facilitator. They work well but they aren’t perfect, which is why there’s a newcomer: the smart credit card.
Have you heard of it before? Not many people have, yet if all goes well, this new technology is set to overtake the throne as far as day-to-day transactions are concerned. Let’s take a deeper look at what this entails.
What Is a Smart Credit Card?
The concept of a smart credit card is simple enough: a single plastic card that acts as an all-in-one payment utility. Never again will you have to deal with a fattened wallet with nearly an inch of plastic; one smart card is all you’ll ever need.
What’s great about it is that it’s compatible with nearly all merchants who already accept cards. There’s a caveat to this, however, and it depends on the actual design of the smart credit card you use.
Even though it looks like a single stripe, modern credit cards actually consist of two separate magnetic stripes that are stacked on top of each other. A card with both stripes will be compatible with all kinds of card readers, but a card with only one stripe does not have the same guarantee.
At the moment, there are four main companies involved in the smart credit card market. Coin came first, but their card only utilizes a single stripe and is therefore incompatible with certain retailers. Plastc, Swyp, and Stratos came afterwards, but all three of them use double-stripe cards.
On the plus side, no matter which card you use, it will be compatible with modern ATMs.
How Smart Credit Cards Work
An all-in-one credit card sounds awesome on paper, but there are logistical issues that may make you skeptical about the technology. To what extent are they “all-in-one”? How do you “configure” or “connect” smart cards with multiple payment options? Are they safer than regular credit cards?
Let’s go through those questions.
Smart credit cards have a built-in microprocessor, which means that they’re more like a primitive computer than a traditional credit card. This microprocessor can communicate with smart card readers over a Bluetooth connection.
The smart card also comes with a reader device that plugs into your smartphone through the audio jack. Once connected, you can swipe any kind of magnetic card (e.g. credit, bank, or even gift cards) and they’ll all be stored on the smart card app. Then, the phone will transmit that new information to the smart card itself.
As for selecting which card identity you want to use, the method differs depending on which one you have. For example, with Swyp, the card itself has a graphic display that shows which identity is “loaded”, along with buttons that you can press to cycle through the identities on the card.
Plastc has a similar system to Swyp except you change identities by swiping across the graphic display. Coin cards have an LED display with a single button that allows for cycling. Stratos is the most limited since it lacks a proper display; only LED lights that represent up to four cards.
When the identity of the smart card is switched, a signal is sent that re-magnetizes the smart card’s stripe to match the stripe of the actual card.
Lastly, there’s the issue of security.
Before a smart credit card can be used, you must establish an account and verify your identity with the company. This involves sharing the last four digits of your social security number and answering questions from your history (e.g. past addresses, loan disbursement dates, etc).
Each smart card manufacturer has additional steps to protect your identity, such as only allowing cards to be loaded if they match the identity you’ve established for the smart card.
Also, smart cards are “tethered” to your mobile device. If the distance between the card and the mobile device becomes too great (e.g. you left it at a restaurant), then the card locks and won’t resume until the relevant security protocol is followed, such as entering a PIN code.
Should You Get a Smart Credit Card?
At the end of the day, the real question is whether or not you should get one of these smart credit cards for yourself. Here are some final considerations you may want to take into account.
First, price. None of these smart cards are currently available for retail. However, at launch, Coin will cost $100, Swyp will cost $99, Stratos will cost $95 per year (yes, a subscription), and Plastc will cost $155. It’s a hefty price to pay no matter which way you go.
Second, ubiquity. Mobile payment methods are great, but not all merchants accept them and it seems that widespread adoption is still far in the future. Smart credit cards can be used anywhere that accepts card (except for Coin, which has slightly more limited reach than the rest).
Third, single point of failure. Just like the master password for password managing software, a smart credit card is basically the “master” for all of your other cards. If someone steals it and bypasses the security, they potentially have full access to everything on it.
Fourth, unforeseen threats. Speaking of security, it’s too early to tell what kind of viruses and malware might crop up over the next few years. Anything that has a processor and can connect with other devices has potential to be compromised, and it’s likely that smart credit cards will be vulnerable in unforeseen ways.
Fifth, future updates. Thanks to the foresight of manufacturers, smart credit cards can receive firmware updates over the air — meaning, when new features are developed down the road, your card can make use of those features without you having to buy a newer version.
Sixth, smartphone dependence. Smart cards can’t be used unless you have a smartphone, and most functions require your smartphone to be near the card. This probably isn’t a big deal for most (we’re never separated from our mobile devices anyway, right?) but it’s something to keep in mind.
