Chip-embedded credit cards, common in much of the rest of the
world, are coming to the US, but very slowly. Banks mostly offer
chip and signature cards, which travelers to Europe have found are
useless at unmanned ticket vending machines in train stations, at
gas pumps, and at many highway toll plazas across the continent.
Oddly enough, several of the leading chip and PIN providers are
credit unions, which makes sense when you see their names -- the
UN's credit union, the
Department Federal Credit Union
Andrews Federal Credit Union, as in Andrews Air
. The latter two are open to the public. They have different types
of cards, so make sure you select the chip and PIN. (The SDFCU was
included in a good
story on EMV -- which stands for Europay, MasterCard, and Visa --
Most of the world is moving to EMV, explains Ken Paul, CEO of
, a leader in mobile payment technology which was founded in 2005
and acquired by
) this year. In Western Europe, more than 84% of the cards issued
are chip and PIN.
The persistence of the mag stripe may have something to do with
costs. While a traditional magnetic stripe card costs about $2 to
deliver to customers, a chip card can cost $15 to $20, according to
ROAM, which makes both cards and readers. For merchants, mag card
readers typically cost about $20 in volume purchases while a chip
reader costs about $40; with a PIN keypad, it can run about $100.
Signatures are easier for banks than PIN codes because they don't
require systems to manage the codes.
Bank of America
) said it stuck with signatures because that's what people are
familiar with in the US, but that sounds pretty lame when you read
about the hassles travelers go through in Europe. The bank did roll
out chip and PIN cards to corporate clients in the US last year --
a year after it had issued them to corporate and commercial clients
in Europe in 2011.
Google doc from FlyerTalk Forums
has a list of credit and some prepaid debit cards that have chips
and signature or chip and PINs.)
Chips provide a greater level of security in card transactions than
mag stripes. In its announcement,
) explained that when a chip card is inserted into the payment
terminal, the chip generates a code that is unique to that
transaction, which it calls dynamic authentication. This code
renders stolen payment information useless.
Chip and PIN cards are typically used in front of the card owner.
In European restaurants, waiters will appear with a wireless card
reader, insert the card, and hand the device to the card owner who
then punches in her PIN. The transaction is completed and the card
ejected. In popular tourist spots, the readers also take mag swipe
cards, but travelers report that in remote locations, chip and PIN
cards are often required.
While the US lags behind much of the rest of the world in chip
adoption, that's largely because it has had a very effective
domestic system for processing transactions in real time based on
Stephanie Ericksen, head of authentication product integration at
Visa, said, "In the US, we can rely on online processing where
transactions are transmitted in real time to the issuer for
approval. With that in place, there's no need for the offline
authentication that was the genesis of chip and PIN."
That doesn't, however, explain why banks are so slow to offer chip
and PIN today. Anisha Sekar, the vice president of credit and debit
, said that there isn't much competition among banks to offer PIN
cards, so the leadership has fallen to credit unions like the UN's,
which have members who travel a lot.
"Most people don't travel internationally and don't end up in an
area where a PIN card would make a difference, and with no one
pushing the banks, it is slow going."
Traveler websites report widespread confusion among bank employees
-- many call center staffs apparently have never heard of chip
cards. Some US cardholders haven't discovered until they are in
Europe that their fancy chip card is not PIN-enabled. An unmanned
gas station at night or a remote train station where the kiosk
requires chip and PIN are not great places to learn you have the
wrong type of card.
Chip and PIN may also be required on toll roads and in parking
garages. One traveler recounted flying into Charles DeGaulle
Airport and finding that the rail ticket machines required chip and
PIN cards. The line at the only cashier taking magnetic swipe cards
was a two-hour wait, so he jumped into a taxi and paid 60 euros to
get to Paris rather than the 10 euros the train would have cost.
(Travel writers suggest you play it safe and carry some cash in
addition to cards.)
Visa, the first company to offer chip-enabled cards in 2011, said
that it had issued 3.5 million by the end of March 2013, but those
are mostly signature cards.
) offers an EMV chip and signature on its Personal (consumer) and
OPEN (small business) Platinum and Centurion Cards.
) offers EMV signature cards in select categories. Many banks will
issue chip and signature cards on request. Last year, Bank of
America announced that it was rolling out chip technology on many
of its consumer credit cards, but again with signatures, not PINs.
Merchants in the US face an October 2015 deadline for moving to
chip cards -- after that, the liability for fraudulent transactions
on a mag card will shift to the stores.
Dan Heimann, consulting manager for back office banking solutions
(ACIW), said that most of the merchant terminals shipping today are
EMV capable. Some banks are issuing chip cards as they replace
expiring credit cards.
Fraud reduction won't fully justify the expense of going to chip
cards, he added, although he thinks some banks will offer chip
cards as a competitive advantage.
Tom Groenfeldt writes about finance and technology, sometimes
together and sometimes separately, for
and Banking Technology in London, from that as-yet-undiscovered
center of the financial universe, Sturgeon Bay, Wisconsin -- 50
miles or so north of The Packers.