How Square fixed the nightmare of slow chip cards

The new chip credit cards may offer much better security and protections against fraud and identity theft, but they constantly field complaints of being slow. Instead of the lightning speed of the swipe, the dips seem to take longer.

It is, however, possible to speed everything up so that a dipped card can complete its business in less than three seconds. And payments company Square has managed to accomplish this feat.

“We just keep iterating and making it as fast as we can,” Square (and Twitter) CEO Jack Dorsey told Yahoo Finance. “Most of our competitors are 11 seconds right now. It’s just bad engineering. The chip card wait time is terrible.”

The key to speed is ownership over each step of a very complex process, says Jesse Dorogusker, Square’s head of hardware.

A sales staff accepts payment by credit card through a point-of-sale (POS) device at a boutique shop in central Athens, Greece, May 10, 2016. Picture taken May 10, 2016. REUTERS/Michalis Karagiannis

How a transaction works with a chip card

A chip card transaction is a complex dance between a myriad of systems. A chip card has a little computer in it, and when it goes into the reader, the card and computer power up and have a conversation. “An unfortunately long conversation,” Dorogusker said. Protocols must be checked, software must be linked, and more.

“[There’s] software in a card, software in the reader, software in the app, and a software connection to Mastercard, Visa, Amex, and Discover,” he said.

For traditional points-of-sale, different companies with different software and different devices slow this all down because they have to communicate with each other. Payment software might come from one place, the point-of-sale or cash register machine might come from somewhere else, and the payment service might be created by having a whole different provider.

“When specs change, a software update is never going to happen in sync across all those and therefore they’re all doing a superset of all the protocols ever written,” said Dorogusker. “They have no chance of being fast. Unless you do what we do.”

Owning all the steps of the payment process

Unlike piecemeal systems, Square terminals utilize its own hardware, software, and payment channels to banks. Maintaining software consistency by writing all the code in-house, end-to-end, makes it possible to speed up the process and minimize lag time.

“We can look at each number of milliseconds each of those steps take and say, ‘well that’s really big, why does it do all that?” said Dorogusker. For some features, Square can skip them when necessary. “We can look at the whole thing and keep whittling it down.”

By not having to farm out steps to outside companies, Square has managed to cut back on time even more. But it also uses a little common sense, like initializing the system before a card is inserted in the reader.

“When we start entering items into a cart, we can fire up the payment system because we know you’re going to pay soon,” said Dorogusker. “So, we power it up, we do all the initialization, we do the certificate, all because you’ve entered something into a cart. No one else can do that.”

Ethan Wolff-Mann is a writer at Yahoo Finance. Follow him on Twitter @ewolffmann. Confidential tip line: emann[at]oath[.com].

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