It appears the U.S. is finally making an effort to catch up with other countries in the implementation of microchip-embedded credit cards, also known as EMV-chip technology. Wells Fargo & Co. announced Wednesday that they will test EMV chip cards with 15,000 customers who travel abroad frequently. On Thursday, JPMorgan Chase announced that it would add a chip to its high-end Palladium card.
The U.S. has lagged behind countries such as Japan, Mexico, China, Brazil and most European countries that have already made the conversion from magnetic strips to microchip-embedded credit cards. American Express Blue cards originally offered microchip credit cards, but without the necessary payment infrastructure at U.S. ATMs and merchants, the feature was unpopular. Fearing a drop in credit card applications, American Express replaced the chip with RFID, the technology that allows payment by holding the credit card near a reader, in 2005.
Microchip Versus Magnetic Strip Credit Cards
EMV technology has already become the standard throughout Europe and other countries because it provides heightened security and protection against fraudulent charges. It is beneficial to every party involved, including consumers, retailers and credit card issuers. Every in-person transaction requires a PIN. One reason the U.S. has fallen behind is that U.S. issuers have focused on RFID technology — also known as PayPass or Blink — instead, hoping to drive credit card applications.
U.S. Travelers Face Difficulty
Almost 10 million American travelers had trouble using credit cards in 2008, costing about $4 billion in lost transactions and $447 million in lost revenue for card issuers, according to Bloomberg News. In some cases, consumers can show identification to verify the card is indeed theirs, but many European retailers simply refuse to accept credit cards without the microchip. Additionally, travelers have faced difficulty using the ever-growing number of automated kiosks in Europe, many of which only accept microchip-embedded credit cards. As discussed in other Credit-Land.com articles, credit cards are often the most convenient payment method for travelers and it is not the smartest idea to travel with a large amount of cash.