The rollout of 15,000 credit cards embedded with EMV microchip technology might not seem revolutionary, but this test by Wells Fargo and Visa could be the first step in transforming American credit card security. JP Morgan Chase has announced similar technology on its premium cards.
If you've traveled recently, you may have experienced difficulty paying for everything from gas to food to lodging using your credit card's magnetic stripe. The U.S. is one of the few developed countries that continue to use magnetic stripe technology on credit cards. Other countries have switched over to microchip smart cards, which are more resistant to fraud and are compatible with the new readers that are becoming standard around the world.
The hurdle for retailers
Retailers would need new card readers to process chip card transactions, and the associated expense and hassle has kept the U.S. from switching over to the new format. It may not change the face of the industry overnight, but Wells Fargo and Chase are taking a noteworthy step forward by providing traveling customers with new credit cards equipped with both magnetic stripe and EMV microchip technology. If you're among the test group, you'll find it markedly easier to use this new card on foreign soil.
Granted, a single new card won't signal the end of magnetic stripe cards in the U.S.--that would require all retailers to change their card readers and adopt the new technology. But it will make travel easier and provide American cardholders with the security benefits of smart cards, which are more difficult to duplicate fraudulently.
Keeping up with the rest of the world
The test also marks a first step toward the U.S. catching up to European Union nations and other parts of the world where chip cards are now the standard. Close neighbor Canada has begun to convert to smart cards: by December 31, 2012, all Canadian retailers, vendors, and payment outlets must be equipped to accept chip cards.
Why is the U.S. so behind in this technology? The New York Times claims there is less credit card fraud in the U.S. than in many other countries, so banks aren't under as much pressure to adopt a new fraud prevention technology. The cost of new equipment at retail checkout counters and gas stations nationwide is also a factor. Whatever the reason for the delay, the new travel smart card from Wells Fargo is sure to be a favorite among international travelers, and may pave the way toward more convenient and secure credit card processing worldwide.