More than six months after Visa® and MasterCard® unveiled their roadmaps for accelerating the migration to chip-and-PIN credit cards in the United States, issuing banks have been a little slow off the blocks to make the cards available to consumers. Sometimes called EMV cards, they are expected to transform credit card processing in this country once they’re widely available.
In chip-enabled cards, identifying information is encoded on a tiny memory chip embedded in the card. At checkout, consumers insert the card into a reader and enter a PIN (personal identification number) on a keypad to complete the transaction. In essence, the chip does the same job as the magnetic stripe that has been the basis of credit card processing in the U.S. for the last half century, but far more securely. Chip-and-PIN is already the gold standard for credit cards in Europe, Canada and Asia, and is making inroads elsewhere.
Americans with mag stripe credit cards often encounter problems with acceptance when they travel abroad to areas where EMV technology is the norm. Although Visa, MasterCard and American Express® require merchants to accept all valid cards, automated systems like ticket kiosks and parking garages often do not. This can leave U.S. visitors stranded.
Dual cards featuring both chip-and-PIN and mag stripe are routinely issued by banks abroad, and some U.S. banks have started making chip-and-PIN cards available to their customers who live or travel frequently abroad. But according to a recent article in the Chicago Tribune, very few banks here are issuing dual cards that can be used universally.
Not surprisingly, many of the dual cards that are available are co-branded with airlines and hotel chains. The article reports that JP Morgan Chase is the only U.S. bank that issues these co-branded chip-and-PIN cards. However, although it co-brands with four major airlines and two international hotel chains, only two of the co-branded cards are chip enabled.
Beyond that, the Tribune says no other domestic mileage-earning cards provide a chip option. This is ironic, considering their target demographic is travelers. It creates a situation where cardholders can make purchases on their cards to earn airline miles and cash them for a foreign trip, but then not be able to use that same card widely once they reach their destination. The situation is even more surprising given that both Visa and MasterCard have imposed an April 2013 deadline for U.S. credit card processors to be able to support merchant acceptance of chip-and-PIN transactions.
What impact will the banks’ apparent reluctance to issue chip-equipped cards to customers on a broad basis have on credit card processing in the critical next year? Will the banks step up to the plate and get with the EMV program? Will consumers force the issue rather than be left empty-handed at an ATM in some foreign land? Stay tuned!