While the payments industry is trying to improve security measures around the existing mag-stripe technology, its inevitable that an entirely new technology will be needed.  Right now the focus is on updating from one outdated mag-stripe terminal to a new, better, more secure, mag-stripe terminal.  However, as discussed in Smart Card Talk, there is almost unanimous agreement that the security model for payments in the U.S. is broken.

The main fundamental weakness of the industry: we have no way to prove identity between the consumer and the merchant.   Fraud rates in the U.S. are on the rise and the situation is only getting worse.  Law enforcement cannot keep up with growing and more sophisticated cross-jurisdiction investigations or prosecute offshore criminal gangs.

With the handwriting on the wall, the basic question is the timing for this eventual shift from today’s legacy magnetic stripe infrastructure to a new standard, be that a chip and PIN, contactless EMV, or something else.  The U.S. payments industry will be undergoing changes in infrastructure for years to come from all stakeholders including the card issuers, POS software and terminal vendors and the networks that process the transactions.