At least four startups are betting the world isn’t ready for mobile payments.
Unlike services like Apple Pay and Google Wallet (which use your phone), all-in-one cards or “smart cards” embrace a familiar medium — the plastic credit card — and turn it into an all-in-one payment solution.
Smart credit cards primarily offer convenience while maintaining security. Instead of carrying a dozen cards (including gift and rewards cards), all your payment options are tidied up into one dynamic card.
Since many merchants aren’t yet equipped to accept contactless payments like Apple Pay and Google Wallet, a smart card is one way to consolidate your wallet until merchants catch on.
It works like this: a card — not unlike the form factor of magnetic stripe cards you currently carry — is embedded with a Bluetooth connection, which it uses to act as a variety of cards. That smart card can act as your mileage rewards card, your debit card, and even your in-store club card.
Since Coin’s introduction in 2013, at least three comparable solutions have entered the space: Swyp,Stratos and Plastc. You’ll have to wait to get them, though. Plastc, Swyp, Stratos and Coin are currently taking pre-orders– but if it sounds like an appealing alternative to mobile payments, getting one of these cards might be worth the the wait.
I reached out to four card makers, and none but Stratos could provide review units. The companies are either committing to giving their early backers the first units, or aren’t ready for distribution just yet.
Once more review units are available, we’ll do a real-world road test. Until then, we know enough about how these cards work and what they do to give you a comprehensive comparison.
How it works
The selling point on smart credit cards is that they offer convenience. Instead of crowding your wallet with many cards (including gift cards and club cards), one digital card represents them all.
Stratos, Coin, Swyp and Plastc achieve this in an unexpected way. When you receive one of these cards, it comes with a magstripe reader that looks a lot like the Square or PayPal card readers.
Once you’ve confirmed your identity, you’ll be able to add your “old school” cards to the smart card’s app by swiping them through the card reader. (More on this under “Security.”) Then, using Bluetooth, the app loads that information onto your smart credit card.
How can one magnetic stripe act as many different cards? Like this: When you select the card you want to use, an induction coil embedded within the card sends a signal that re-programs the magnetic strip.
The added benefits
Some of these cards offer more than just convenience. For instance, the accompanying Plastc app can also act as a place where you can manage your budgets and keep track of all transactions in one central place, much like Mint.com.
Stratos, Swyp, and Plastc will offer tokenization eventually, a feature that masks your credit card’s identity for each transaction, preventing your true account number from being exposed during a credit card data breach. (Plastc and Swyp plan to add this feature as an update after the initial launch.)
These cards can be updated with over-the-air updates, so expect more features to be added as smart card makers look for ways to make their product stand out from the rest.
Where they’re accepted (or not)
They’re just like any other credit card, so you should be able to use them everywhere, right? Almost.
Most of the credit cards in your wallet are actually equipped with two magnetic stripes, called “Track 1” and “Track 2.” You can’t see them — they’re usually masked under what looks like a single stripe. Track 1 is primarily used for your name, while Track 2 is used for your credit card number.
If a credit card contains both tracks, then your card will be accepted universally. But, if the card only contains one track (Track 2), then some credit card terminals might not be able to read it.
Coin only employs one track, and provides a list of major retailers where its card is not accepted. When asked if and when the card would be updated to include both tracks, Coin did not respond.
This isn’t necessarily a deal-breaker, but definitely something that might affect a seamless transition from your current card to a smart card. Plastc, Swyp, and Stratos all use both tracks, ensuring your card will be accepted everywhere you go.
And, yes: smart cards can be used with ATMs.
As easy as a credit card?
Just like picking a card out of your wallet, you’ll need to choose a card at the cash register. Stratos, Coin, Plastc, and Swyp want to make this process as fluid as possible so that using their smart cards are just as easy as the way you pay for things now. The method is a little different for each card, and while we haven’t had a chance to do a real-life test, here’s what we know.
- Stratos. When you’re at the register, you’ll tap the card onto the counter top (or another hard surface) to activate. Stratos will light up, at which point you’ll choose the card you want to use by selecting it on the card itself. Stratos doesn’t have an actual display — just LED lights that represent your primary four cards.
- Coin. To make a purchase, you’ll tap the button (it’s flat) on the card to toggle through your available cards and make a selection.The card has an LED display, so you can see the names of the cards as you toggle through.
- Plastc. Since it has a considerably large e-ink display, Plastc is probably the most user-friendly card. To select a card at the point of sale, you’ll swipe across the e-ink display until you find the card you want to use. You’ll be able to arrange the order of the cards. Consider that we won’t know how responsive the screen is until the card is available to test.
- Swyp. This one works a lot like Plastc. The card include a small display that shows your card’s name and account information. It’s equipped with buttons so that you can toggle through your cards when you’re ready to buy. Swyp’s stand-out feature is that it will eventually learn which cards you like to use based on the time of day and location.
Because this is an entirely new concept and product category, all four makers are taking a very careful approach to how your cards are stored, programmed and kept secure. Before we dive into card-specific approached, here’s how (generally) all four cards work from a security perspective.
- Verifying your ID. To ensure no one creates a smart credit card using your name, the card maker will conduct a thorough identification verification process that ensures you are who you say you are. First, you’ll provide your name and the last four digits of your social security number. Most card makers use a third-party service to then verify your ID by asking questions about your previous addresses, family members and other information only you should know.
- Adding accounts to your smart card. As we’d expect, you’ll only be able to add cards that match the account name you verified in the first step. In addition to swiping the card, you’ll take a photo of it to ensure the info on the card matches what’s on the magnetic stripe. Plastc takes that a step further and uses the front-facing camera to ensure the person adding a card is the same one who created the account.
- Losing your card. The mechanics of this are a little different with each card, but the point is the same: security measures ensure it will be difficult to use your card if you lose it. For instance, Swyp requires a four-digit PIN you’ll enter on the card if it loses connection with your phone. Coin works similarly, but instead of a PIN code, you’ll be required to enter as series of button presses on the card. Stratos and Plastc let you determine how long they should wait before shutting down after losing a conenction with your phone.
- PCI DSS compliance. Anyone who accepts credit cards, online or offline, is required to be PCI DSS (Data Security Standard) compliant, and that includes smart cards. This ensures that the card data they collect and store is done in a secure fashion. It also ensures they’re equipped to prevent, detect and react to any security breaches. Stratos, Plastc and Swyp are all working on meeting these requirements. Coin did not respond.
Plastc and Swyp told us in interviews that they will ship cards that are capable of programming EMV (or “chip-and-PIN”) cards. Those same cards can also be used for NFC-based contactless payments (where you’d tap the card on the terminal instead of swiping.) Stratos also plans to add this feature and will incorporate it into the next version of its card.
These features won’t be available at launch, but once the companies are ready to deploy the updates, cards will be updated over the air.
This is important because by the end of the year, a liability shift will take effect, and merchants who do not support EMV cards will be responsible for fraudulent transactions.
In order to comply, more merchants will update their credit card terminals to accept these new cards. Those new terminals will likely also work with contactless payments like Apple Pay and Google Wallet. If that’s the case, then ubiquitous support for contactless payments might be around the corner. At which point we’ll ask: where do smart cards fit in?