Visa and MasterCard have backed down on plans to fully introduce chip technology for all credit card transactions in October.

The complete introduction of chip technology will be delayed until after the holiday shopping season. (istock)The companies say merchants aren't fully ready to adopt the technology.

Under the original timeline, merchants accepting MasterCard were expected to have the technology to accept chip cards by Oct. 15, while Visa wanted merchants to be compliant with chip cards by Oct. 1.

As part of the push to get the so-called chip-and-PIN, point-of-sale terminals in place, both card issuers had warned businesses not adopting chip technology that they would be liable for any fraud or misuse of cards, which could have been avoided with a chip terminal.

"While many merchants have already made the investment in migrating to chip, MasterCard heard through ongoing dialogue that some merchants need more time to upgrade their point-of-sale terminals to accept chip-enabled cards," said Oliver Manahan of MasterCard Canada.

'This one-time extension allows merchants to temporarily delay the adoption of chip technology until after the busy holiday shopping period'—Tim Wilson, Visa

Both companies have now agreed to extend the full introduction of chip compliant terminals till March 31, 2011.

"Visa and its clients recognize that this one-time extension allows merchants to temporarily delay the adoption of chip technology until after the busy holiday shopping period, should they choose to do so," said Tim Wilson, head of Visa Canada.

Chip cards contain embedded microchips that provide greater security for credit card transactions. The chip contains encrypted information and requires the user to enter a PIN number to complete a transaction.