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Is that a gun in your pocket?

When you pay with your card in a retail outlet, what is more important - that you pay with a card or that it's you who is making that payment? The industry is still defining CP as "card present", although it should be "cardholder present". Here's why.

Petrochemical derivatives (aka "plastic cards") are being digitized. It's a puzzling paradox that banks tout their mobile wallets and yet are still clinging to those bits of plastic, wrongly believing that they have a "connection" with customers that way. It's time the banks and the card networks understood that it doesn't matter what you have in your pocket.

If I take some US bank card (of mag stripe variety) and use a dongle to copy the mag stripe data onto another piece of plastic, is that cloned card fundamentally different from the original one? Well, the clone would lack "window dressing" - bank logo, card network logo, holograms etc. But who pays attention to those easily forged bells and whistles these days?.. Yet, when I swipe the cloned card, neither the card network nor the issuer would notice a difference.

If I digitize mag stripe data (that's what a card reader does anyway) and then present that digitized data to a POS terminal via my mobile phone, would card networks or issuers know where the data is coming from? No. Should they care? Not if they understand that a piece of plastic per se carries no weight. It's active participation of the cardholder in a transaction that is important.

How can we establish that it's me who is using my card account for a particular transaction? "Simples!" ATM-style online PIN or phone-linked (i.e. out of bound) authentication step. Layer that with tokenisation (that's where the industry is moving to anyway) and then it doesn't matter how you present your card data at POS: via plastic card, via NFC, via Bluetooth or via smoke signals. All that matters is that it's you.

P.S. "Card networks" should rename themselves to "payments networks" to stay relevant and to truly reflect what they do...


Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 28 September, 2013, 12:46Be the first to give this comment the thumbs up 0 likes

An ex-colleague in the USA owed a few of us a treat but couldn't spare the time to take us out. She simply gave her credit card to us. We went to a nearby fast food restaurant and charged all our meals to her credit card. We weren't even asked for a signature, so we didn't have to engage in any sign-with-left-hand kind of friendly forgery. I was assured that proxy credit card transactions like this were quite common, at least for $ and $$ purchases. Maybe the stores in question are flouting some rule or the other but "Card Present" is still very much a reality. Any alternative mechanism that ensures "Cardholder Present" might be well-intentioned but is likely to be perceived, at best, as a solution seeking a problem or, at worst, as a threat to business as usual.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 08 September, 2019, 17:32Be the first to give this comment the thumbs up 0 likes

I happened to stumble on to this post today. 6 years later, plastic is still alive and kicking. Apple made great progress in digitizing and tokenizing third party issued credit cards in Apple Pay to minimize the role of the physical plastic card but, when it came to its own card, Apple has chosen plastic - er titanium - for its own Apple Card. Merchants also continue to care only about the card, not cardholder's physical presence at the point of sale. 

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

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