March 7, 2014
In the wake of the Target data breach late last year, retailers and financial institutions are scrambling for answers. Many are calling for upgrading to the silicon-chip-embedded credit and debit cards (also called EMV cards) that are popular internationally, but the costs are daunting.
An Ohio State University professor believes he has a better idea: printed plastic cards in which the user’s information is part of the plastic itself.
"It’s low-cost, simple printing,” said Paul Berger, professor of electrical and computer engineering.
“You don’t need these $6 billion factories. All I need is a high-end inkjet printer, and I’m off to the races.”
The newness of the technology could worry retailers, although the cash savings may offset some of those qualms, said retail analyst Chris Boring, principal at Boulevard Strategies.
“They’re cautious by nature,” Boring said of retail companies. “It is a new technology. They have to do their due diligence with it.
“For one thing, they’ll want to be sure it looks like credit cards look like now. The design and look of the card is important. If it wouldn’t impact that, if the card is ready to go, then it seems reasonable that they would go with it. I don’t see a big downside.”
Change is on the way regardless.
Both Visa and MasterCard have announced plans to switch over to EMV cards in the United States by October 2015. The cards get their name from these initials: Europay, MasterCard and Visa.
The National Retail Federation and the Retail Industry Leaders Association also have called for greater safeguards in payment systems after Target, Neiman Marcus and other retailers found that their payment systems had been compromised.
The EMV cards, developed in the mid-1990s and in common use internationally, store data in an embedded computer microchip and usually require the use of a PIN rather than a signature. Computer-chip cards are virtually impossible to counterfeit because the computer chip changes the data on them for each purchase, unlike magnetic-stripe cards, which hold information that never changes.
But the cost will be high to adopt the new technology.
A magnetic-stripe card costs 19 cents to manufacture, while an EMV card costs $1, according to TowerGroup, a research firm in Needham, Mass.
Financial institutions probably would spend $500 million to upgrade the ATM system to accept those cards, and retailers could spend nearly $6.8 billion to upgrade their point-of-sale terminals, TowerGroup estimated.
In addition, electronics-grade silicon can be costly, as can the manufacturing process of embedding the silicon into the plastic cards, Berger said. Also, the cards have to be thicker because the silicon is fragile and must be protected. “If (the chip) bent, it would stop functioning,” he said.
Berger’s all-plastic invention is far cheaper to manufacture because it allows him to use the entire flexible card — it’s the same size and thickness as current cards — as a memory board.
“So you have a thin card, all printed plastic, instead of having to paste silicon regions on a card,” he said.
The plastic chip’s encrypted memory is able to store whatever data is required by the retailer or bank.
Berger began “conjuring up” his card as the result of an experiment in 2005 by a student who was trying to build solar cells using plastic.
“She had read in a paper that someone put a thin layer that made it a little better, so she tried to do some things like it,” Berger said. “Well, her data had a little extra bump, a bit of data which shouldn’t have been there. But the thing about physical science is, data doesn’t lie."
Berger is working on the discovery with Donald Lupo, a professor in the department of electronics at Tampere University of Technology in Finland, and with Wright State University in Dayton. Berger recently licensed the patented process to his Columbus-based startup company, QuTel.
Whether the banking industry would go along with a quick adoption of Berger’s card is difficult to say, said Doug Johnson, vice president of risk-management policy at the American Bankers Association.
“There is some argument that the EMV may be leapfrogged,” Johnson said. “But, as we know, people are very much wedded with their plastic. We know it will be a slow migration to mobile devices for payment, for instance.”
Credit-card companies already are trying to move in the direction of payment via mobile devices. MasterCard, for instance, last month announced that it is in the test phase of a new service for travelers abroad that would enable card transactions only when users have their mobile devices switched on in a specific location.
EMVCo, the European-based organization that manages, maintains and advances EMV specifications, is also designing the next-generation payment technology, which includes mobile devices.
But even if mobile devices completely overtake a plastic card, Berger’s plastic circuitry could become a big player.
That’s because the process by which Berger prints circuitry on a plastic card — called quantum tunneling — also could be used in a device such as an iPhone, Berger said. Because the plastic chip consumes less power than a silicon chip, an iPhone would be able to run far longer between charges, a huge consideration for such portable devices.
But first, there’s the card to consider — and it could be manufactured in Ohio, Berger said.
“You don’t have to broker a deal with a chip manufacturer in Taiwan. It’s a lot simpler production line. The equipment is similar to the kind you use when screen-printing T-shirts for your family reunion. This is something where we can just go right to market.”