credit card

Chase isn't content to let Wells Fargo launch the first "chip-and-PIN" credit cards in the United States. After Wells Fargo announced plans to pilot the European-style security feature on 15,000 of its new credit cards later this year, officials from JP Morgan Chase announced plans to launch Chase's own version of the EMV chip in its JP Morgan Palladium credit card as early as June 2011.

Until this year, only a handful of specialized credit unions and overseas banks have offered EMV-enabled credit cards to American consumers. European regulations have required most merchants to phase out processing systems that read magnetic stripes, favoring the enhanced security features of "chip-and-PIN" and RFID technology. Business travelers and tourists venturing outside major cities report recent trouble finding merchants willing to accept easily-cloned, American business credit cards. According to news reports, European lawmakers have considered banning magnetic stripes completely.

How "chip-and-PIN" credit cards work

The magnetic stripe on a credit card works just like a splice of audio tape. Instead of sound, the stripe carries a series of pulses that contain a cardholder's account information and a special security code. However, credit card issuers and merchants have battled fraud rings who use cheap tools to "skim" the magnetic stripe from unsuspecting consumers. Rampant fraud in Europe prompted banks and merchants there to speed adoption of "two-factor" authentication, involving both a smart chip and a PIN.

The EMV microchip on European credit cards carries the same information as a magnetic stripe, but scrambled. Only a card reader connected to a live payment network can decode the payment information in real time. Because criminals have managed to circumvent even this technology, European credit card issuers now require cardholders to enter a personal identification number for every purchase, whether debit or credit.

Building "chip-and-PIN" cards for Americans

Tim Feran of the Columbus Dispatch revealed the secret behind Chase's quick response to the Wells Fargo announcement. Chase's credit card manufacturing center in Columbus, Ohio had already been equipped to produce EMV-enabled business credit cards on request for high-spending corporate travelers. Company officials declined to confirm the exact location where workers will embed new credit cards with microchips, but expressed excitement about introducing Americans to the new security feature.