Anchoring to the past

The credit card industry’s migration from the magnetic stripe to new chip-and-pin cards is an extreme example of the network effect: the benefit — increased security — will only be realized when everyone has moved over and support for magnetic stripes can be discontinued.

But the industry keeps anchoring its customers to the past. Visa and MasterCard introduced the mini card a few years back, and American Express is now responding with the Butterfly. These products have two things in common: they both make carrying credit cards more convenient, and they both are fundamentally, physically incompatible with the chip-based card infrastructure.

This will both slow down the migration of chip-based cards and anger customers when their convenient accessory cards are finally taken from them — a lose-lose proposition if there ever was one.

Visa, at least, seems to have realized their blunder and started pushing an RFID-based mini card as a way to keep the form-factor benefits while moving to chip-based technology. But with no infrastructure support and a growing privacy concerns over RFID, that approach looks like a pipe dream to me.