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Nearly every American has an EMV card in their wallet. Three and a half years after the liability shift here in the US it seems that finally Americans have figured out how they work and have come to accept them. It would seem obvious that the technology did not originate in the US but did you know that the technology is actually several decades old? Today we will feature a short piece about the beginning of the EMV card.
Designed Originally to Speed up Transactions
The technology that has gone into the credit card has been improving since the first cards were released. Most of the issues revolved around the amount of time it took to process a transaction and most of the solutions like the magnetic stripe were aimed at fixing this. Since the electronic terminal had to send a request to the cardholder’s bank over a phone line it still took a long time to complete a transaction. Part of the issue in France was that the nation’s telecom infrastructure was slow. In order to increase credit card acceptance in the country something needed to change.
So another solution was needed and the memory card was developed in 1974 by Egyptian-born French inventor and engineer Roland Moreno called la carte à puce (chip card). He came up with the idea in his sleep and modeled it on a seal ring used by European nobility. His first prototypes did not take off but he simplified the design using a plastic card and adding the microchip. He demonstrated it for the first time in 1976 using a custom built machine which he held together using a toy kit. It did not prove to be a hit. His goal was to be able to store an amount of cash on the card so that it could be deducted directly from the card saving the need to use the slow telecom system to verify a transaction. The public just was not ready.
Combatting Fraud
By 1983 credit card fraud in France was becoming rampant and the perception of Moreno’s invention was changing. The first smart card was introduced as a telephone card known as the Télécarte. It was an instant hit and French banks reacted quickly. By the following year the smartcard became a national standard and all ATMs throughout the country were connected to each other, an impressive feat for 1984. By 1988 the smartcard, or EMV card as we would know it today, began to be deployed to the general populace and immediately a 9% drop in credit card fraud was seen.
A smart card was in the hands of every French man and woman by 1993. The chips were also embedded in all debit cards as well and could be used to withdraw cash at all ATMs. A PIN was used to authenticate transactions not only speeding up the amount of transaction time but also helping to make credit cards more acceptable for both consumers and for merchants. The original concept of being an electronic purse entered the European market about the same time and were common in most European nations during the 1990s.
Unfortunately the rest of the world did not take notice. Many other nations felt that the cost of implementing such a system was far more expensive than the amount of credit card fraud happening and did not want to upgrade their systems. It took well over a decade for other European countries to adopt the standard and much longer for the United States.
Moreno became a national hero in France and in 2009 was awarded Légion d’Honneur in 2009. He died in 2012 in Paris with a reputation as somewhat of a nutty professor. Moreno could have developed the most important payment technology of the 20th century.
