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What Will It Take To Make Chip-and-PIN Happen In The U.S.?

Written by Evan Schuman
May 24th, 2010

Despite an aggressive campaign launched this month by Wal-Mart to push for its adoption, it looks increasingly likely that to have Chip-and-PIN (EMV) adopted in the U.S. will require government intervention. Wal-Mart execs and others in retail are still hoping to avoid such a federal move—knowing how much Fortune 500 boards love more regulation. But intransigence by major card brands, inertia from the biggest bank card issuers and deep-seated consumer security apathy may leave no alternative.

By early next year—and possibly by this year’s holiday season—Wal-Mart will start accepting Chip-and-PIN cards at all U.S. locations, said Jamie Henry, Wal-Mart’s director of payment services. Because of the global needs of the world’s largest retailer—its stores in much of the rest of the world already required Chip-and-PIN—Wal-Mart’s POS hardware in the States has supported Chip-and-PIN for years. (Well, Henry points out, it’s not absolutely complete yet, even hardware-wise. But it’s in place at 100 percent of the U.S. stores and 98 percent of the lanes in those stores.)

The POS software is not yet Chip-and-PIN compliant, but that should be in place “toward the end of this year or early next year,” Henry said. “It’s just a matter of coding to the specification.” Wal-Mart has been able to repurpose much of that code from other recent POS Chip-and-PIN work for other countries—such as Wal-Mart Canada—and much of the rest is dealing with the U.S. payment authentication mechanisms.

Editor’s Note:

But being able to accept such payments won’t help Wal-Mart’s security situation unless U.S. consumers start using the cards there. Right now, no card issuer in the U.S. has issued Chip-and-PIN cards so, with the exception of one specialty bank that supports United Nations employees. Most of these workers need cards that can work both in the U.S. (for when they leave the U.N. compound and venture into New York City or, heaven forbid, New Jersey) and in the countries they represent. Increasingly, non-U.S. retailers—especially in the U.K.—are strongly discouraging or even preventing the use of mag-stripe-only cards.

So when Wal-Mart is able to accept the Chip-and-PIN cards in January or so, what consumers would be in a position to offer them to get Wal-Mart goods? It’s an admittedly small set. There will be small pockets of country cross-overs from our two Chip-and-PIN accepting neighbors, Canada and Mexico. Those Canadian and Mexican consumers could impact Wal-Mart stores in regions that abut the extreme North and South. Then there are those U.N. employees, tourists and other visitors from the rest of the world. Initially, that will be about it.

At best, it’s hard to see those combined groups even breaking one percent of Wal-Mart’s U.S. purchases. What’s the plan to increase the U.S. acceptance of Chip-and-PIN?

Wal-Mart’s perspective is that it wants the U.S. financial industry to at least agree to a timetable. “The United States has made no progress. We’re not even on the field yet,” Henry said. “My concern is that, every single day, merchants are making a decision on IT. Wal-Mart is pushing for ‘Let’s get a plan. We’re going to plow ahead. We’re going to do it.'”


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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