here's always a new wrinkle in card processing. The latest wrinkle is the absence of one: It's the glossy, smooth unembossed bankcard.

Unembossed cards move merchants away from older forms of card authorization and toward electronic means. The cards enable issuers to use background software algorithms during the electronic authorization process.

The software allows issuers to evaluate the likelihood of fraud for each card-present, real-time transaction. Yet, merchants will bear greater risk for continuing to use nonelectronic, non-real-time authorization methods.

The first MasterCard Worldwide unembossed cards were issued on this continent in December 2005, according to the company. That program began first in Canada, with several additional programs being launched into the market in 2006.

"MasterCard Unembossed has been adopted at a different pace throughout the world, given the different market needs issuers [face]," stated MasterCard Global Products Spokeswoman Joanne Trout in an e-mail to The Green Sheet. "Canadian issuers were early adopters of MasterCard Unembossed to promote prepaid programs.

"No U.S. issuers have yet launched a MasterCard Unembossed card program," she stated. Yet several U.S. issuers are now implementing the program, with plans to debut the cards in the near future. Card-issuing banks in 42 other countries offer MasterCard unembossed cards. Travelers from those countries are already presenting the cards here, she added.

To date, Visa's U.S. member financial institutions have issued only unembossed prepaid cards, Visa U.S.A. said in an e-mail response. "Until recently, the only unembossed Visa cards handled by U.S. merchants were those issued in other countries."

However, merchants will start seeing more unembossed Visa cards as member banks put more into the marketplace "to accommodate the changing payment environment," Visa stated.

Targeting more consumer segments

MasterCard is not dropping standard, embossed cards, but rather has added another payment solution to its suite of card programs. The unembossed card is intended to target nontraditional cardholder segments, Trout stated.

The wording "Electronic Use Only" on unembossed cards issued in both brand names promotes electronic processing of transactions, according to both card Associations.

An increased rate of electronic authorizations will ultimately help issuers drive down their risk by having greater control over authorizations. It will also give them greater confidence to issue cards to consumer segments they may not have targeted previously, Trout stated.

"Unembossed cards help mitigate the risk of fraud by ensuring that a real-time authorization is always received at the time of the transaction," Visa stated. Real-time authorization is particularly important for prepaid cards with lower balances.

Mobile merchants at risk?

Unembossed cards pose conundrums for some, especially mobile merchants without wireless authorization capability.

"It's going to open the door to a lot of risk and unnecessary chargebacks," said Douglas Mack of Card Payment Systems. The company received an "FYI" from its processor to be aware of the cards, he added.

If armed only with imprinters, what are pizza delivery people, limo drivers and trade/craft exhibitors to do when an unembossed card is presented for payment? Mack said.

"What's going to protect them from a chargeback?" The cards may also negatively impact general contractors and home repair businesses, such as plumbers, he said.

In-store sales personnel, who are trained to get an imprint in the event a card does not swipe, will not be able to do that with such cards.

"My big concern is the risk that this is going to open merchants - and acquirers - to chargebacks. How many losses are we going to see because we can't properly defend a merchant?" he said.

If merchants do not have the ability to physically swipe an unembossed Visa card, or if the POS terminal cannot read the mag stripe, merchants should ask for another form of Visa payment, the card Association stated.

Merchants may use manual paper drafts to process unembossed Visa cards, but they do so at their own risk of a chargeback, if the transaction is disputed. Key-entered authorizations are also subject to standard Visa "card not present" risks.

Trout did not directly respond to the question of whether merchants can refuse to accept an unembossed MasterCard; instead, she replied that mobile merchants can key-enter account information or call in for an authorization.

"If a chargeback arises, the acquirer will not be able to present a handwritten sales slip as valid documentation in support of a second presentment, which may increase his risk in a chargeback situation," she acknowledged.

Cardholders benefit from these cards because the unembossed program brings more consumers into the bankcard world, according to Trout.

The program is expected to attract the unbanked; credit-challenged consumers; near prime, first-time cardholders; people new to the workforce; and businesses with limited credit history.

"Most customers receiving a MasterCard Unembossed card do not currently have another form of payment," Trout stated. "This card is empowering customers to access all the benefits and purchasing power that MasterCard programs provide."