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EMV Countdown: Do You Have to Have It?

NEW YORK (MainStreet)—Call this a gaping digital divide, where the cool credit cards come with an embedded computer chip and the definitely uncool cards have the same dowdy magnetic stripe that long been a playpen for crooks and scamsters.

Odds are 99 to 1 you don't have a so-called chip and PIN card - although if you lived in Europe the odds would be 99 to 1 that you would. Ditto for living in Canada, where chip and PIN - also known as EMV or Europay, MasterCard and Visa for the prime movers behind it - has been in wide use for a couple years.

The reason for chip and PIN adoption in much of the world? It's a more secure card. And, because it packs a tiny computer, it knows things about its owner (such as the unique PIN or personal identity number) associated with the card. When a financial institution deploys chip and PIN, in that instant it puts skimmers out of business, because their gear cannot copy what's on the chip.

The other reason to want one now: more point of sale terminals, especially in Europe, only take chip and PIN cards. Try to swipe a mag stripe card at those terminals, and it is sternly rejected.

That's triggered loud outrage on the part of Americans abroad who suddenly find their credit cards are useless, and that is why pioneering institutions such as the New York based United Nations Federal Credit Union have begun issuing chip and PIN cards at least to customers who are known to travel overseas.

What is keeping you from having a walletful of chip and PIN cards is one word: money. Deployment of the technology in the United States is stalled.

Card issuers balk at the sharply higher costs of issuing chip and PIN cards which, sources said, typically cost in the vicinity of $5 per card, compared to perhaps $1 for a mag stripe card. Multiply that over hundreds of millions of cards and this puts big money in play.

Merchants, too, are grumbling over the costs - estimated to be many billions of dollars - involved in upgrading the aged point of sale terminals used in most stores to new, spiffy EMV compliant terminals. "The costs of the equipment and the upgrades to the payments infrastructure will be very large," said Mike English, an executive with Heartland Payment Systems.

If the promise of reduced fraud is the carrot, the stick - waived by MasterCard and Visa - is that effective October 2015 merchants will be held responsible for fraud in their stores if they have not upgraded their terminals.

Probably, say many experts, not even the threat of the liability shift will be enough to prod the U.S. into chip and PIN, certainly not by 2015. "We project there will not be broad adoption before 2017," said Al Pascual with Javelin Strategy + Research.

"2017 is a good date in my mind," said Anthony Genovese, an expert with payments technology company Compass Plus.

English shared the skepticism: "I think it will be a slower road to EMV acceptance in the US than the card brands want."

"It's a chicken and egg problem," said English, who elaborated that merchants dig their heels in about spending to upgrade their point of sale systems, because they don't see many - or any - chip and PIN cards. But a reason there are no chip and PIN cards is that there are very few terminals that read them in use in the U.S.

Another hurdle in the wide rollout of chip and PIN cards is that, so far, card issuers have been mum when it comes to communicating about possible benefits of the cards to consumers, and so there is no groundswell from early adopters who insist they want to have the latest and greatest plastic in their hands.

Are the cards ever coming here? "Eventually," said English. The technology has undeniable benefits, and the theory is that as more chip and PIN cards trickle out, the remaining magnetic stripe cards will be subjected to intensified fraud and that will prompt a speed up of chip and PIN adoption.

You still want one, now? There's a trickle of chip and PIN cards into consumer hands, with most of the biggest banks having some availability. An Internet search - for chip and PIN credit cards USA - will quickly point to possibilities. Caveat emptor: most of these cards come with annual fees.

And still there is almost nowhere to use them, at least in the U.S.. At least not as true chip and PIN cards. These early versions come with a mag stripe, too, so they can be read by old terminals and, yes, that wipes out just about all of the purported chip and PIN security benefits.

Travel frequently to Canada and Europe, however, and it's a no brainer. A chip and PIN card is becoming almost as essential as a passport in crossing borders. It probably even is worth the fees issuers want because it truly is a bummer to be in Paris with no working credit cards.

--Written by Robert McGarvey for MainStreet

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