Though microchip-embedded smart cards are issued and accepted in 130 countries around the world, the U.S. has been slow to adapt. Americans traveling overseas have been frustrated and annoyed when it comes to using their old-fashioned credit card with a magnetic stripe, also called a mag-stripe.

Magnetic stripes on credit cards have been around since the 1960’s, and at the time were a big security improvement over manual imprints of the number on the card face. But with the advance of technology available to crooks, these cards aren’t so safe anymore - account information from mag-stripe cards can easily be “skimmed” and then counterfeited by thieves.

After purchasing an inexpensive portable device, all a crook has to do is get a credit card out of the hands of its owner for a moment to swipe and skim the information from the card’s mag-stripe, for example, by bribing restaurant wait staff to do their dirty work. Crooks can also get the owner to skim the card for them by secretly implanting the device at terminals such as ATMs (automatic teller machines), movie rental kiosks, and pay-at-the-pump terminals.

To fight credit card fraud related to skimming, card issuers and merchants overseas have transitioned to using chip-and-PIN technology - also known as EMV (Europay, MasterCard, VISA) - over the past 15 years. Chip-embedded cards cannot be skimmed and counterfeited like mag-stripe cards. As an extra security feature, the card user must also input their PIN (personal identification number) to complete a transaction.

Many overseas vendors, such as unmanned kiosks and self-serve gas stations, don’t even have the magnetic stripe reader. Travelers from the U.S. typically find that even if the credit card terminal is equipped to accept their card, they often meet a merchant who isn’t familiar with the swiping process and doesn’t know how to complete the transaction, or one that outright declines American cards because they feel they aren’t safe to use.

Wells Fargo and JPMorgan Chase have been the first U.S. banks to pilot a smart card program. In order to meet the credit card needs of Americans traveling abroad, the two banks released cards that have both a microchip and a magnetic stripe. These hybrid cards will still be susceptible to skimming due to the mag-stripe, but at least they can be used virtually anywhere in the world.

Chase Bank announced the first EMV-enabled card in April, the JPMorgan Palladium, offered exclusively to the wealthy. The bank then followed with the release of a more widely available card, the Signature Select VISA. Chase said they expect to make EMV chip technology available on more cards within the year.

Wells Fargo started their pilot program off this summer by inviting 15,000 of their most frequent travelers to test out their hybrid card, the VISA Smart Card. The bank didn’t say when chip-enabled cards would become more widely available.

Other banks are expected to follow the lead of Chase and Wells Fargo in the near future so that consumers can enjoy the safety and convenience that comes with using a credit card, even while traveling abroad.

But until merchants here at home convert to the EMV readers and eliminate the need for us to carry a dual-technology card that also has a magnetic stripe, Americans will be missing out on the security that a true smart card can offer.



Sources:
JPMorgan Chase
Wells Fargo Bank
EMVCo
Bloomberg
USA Today