Brace yourselves — credit cards are in for a change. By the end of 2015, 41% of U.S. debit cards, and 70% of U.S. credit cards will be embedded with security chips.
The chip, called EMV (Europay, MasterCard, Visa), has been in use throughout Europe, Canada, and parts of Latin America and Asia for the past several years. The chip is accompanied by a PIN, which is a combination that ensures cards are more secure. Conversion to the newer system — and the newer cards — will be expensive, which is why American vendors have avoided it so far, and have come up with alternative methods to capture fraudulent card use, whether it’s checking cards in real-time before they’re used for payment, or cutting off credit cards when unusual purchases are made.
America’s reliance on the older magnetic strip technology, though, is coming back to bite them as fraud cases have continued to rise in the U.S. “The fraud rate has doubled from 5 basis to 10 basis points now,” says Julie Conroy, a research director in retail banking. “Criminals are targeting the U.S. because we are the weakest link.” Thieves can either hack business databases, or skim a victim’s card, in order to produce duplicate cards they then sell online.
According to Forbes, there were three main precipitates of the switch to chip cards — fraud, the Target card breach which illuminated the potential data dangers with magnetic strip cards, and the 2010 eruption of Eyjafjallajökull in Iceland. Thousands of Americans were stranded in Europe for weeks after the volcano’s ashes clouded airline routes, and had to deal with cards frequently being unaccepted by European vendors.
“A number of issuers said they wish it had been done five years ago because they are getting killed by the fraud; the counterfeit card fraud is increasing 20% to 30% year a year,” says Conroy. It’s a good point to make in light of the fact that the estimated cost of conversion is quite high. Replacing cards with EMV chip cards — which are more expensive to produce — will cost an estimated $3 billion, while replacing the payment terminals merchants use to process cards will cost another $2.5 billion. Credit card approval is fairly easy in the U.S. — anyone with a FICO score of 750 or above is typically approve
By 2015, the U.S. Will See Widespread Adaption of EMV Credit Card Chip Technology
