June 17, 2024

Bucks: Small Players Offer Smart Cards, but Not Big Banks

You may have read in this newspaper about some Americans having problems using their credit or debit cards overseas because the cards rely on older “magnetic stripe” technology. Many countries are switching to more fraud-resistant cards that use tiny chips to conduct transactions.

Some vendors in Europe, like those selling tickets or services at unattended kiosks (gas pumps, for instance), can’t process the magnetic stripe cards, which remain the standard for credit and debit cards issued in the United States. So if, like most Americans, you bank at a financial institution in the United States, your card could potentially cause you some problems overseas — unless, that is, you happen to be a member of a small credit union.

The State Employees’ Credit Union of Raleigh, N.C., just started offering debit cards with the so-called E.M.V. chips (for Europay, MasterCard and Visa) to members who bank at its 236 branches throughout North Carolina. “We had begun to hear about problems with acceptance from members traveling internationally,” said Leanne Phelps, senior vice president of card services at the credit union. “It was sporadic.”

Just a small percentage of the credit union’s debit transactions are international. But after hearing the complaints and realizing that both Canada and Mexico were moving to the chip cards, Ms. Phelps said she became convinced that her institution should make the switch. “We’re sandwiched between those two countries,” she said.

Last month, the credit union began switching over the cards used for its “travel” debit accounts — a sort of forced budgeting mechanism marketed to globetrotting members. The accounts have a dedicated debit card and a balance fixed by the user, to avoid overspending while on a vacation. By the end of this year, however, the credit union aims to equip all of its debit cards with the chip technology. Another credit union, the United Nations Federal Credit Union in New York, has been offering credit cards with the chips for about a year.

So if small credit unions are offering the latest card technology to members, why don’t big banks? The answer to that question is a bit complicated, said Martin Ferenczi, managing director of card systems in the United States for Oberthur Technologies, a large maker of E.M.V. chips. Oberthur entered the American market in 1994, and is still waiting for widespread adoption. “We’ve been very patient,” Mr. Ferenczi said. “The only country not very advanced in this technology is the United States.”

To be fair, he noted, one reason the United States has been slow to adopt E.M.V. technology is that there has been less card-related fraud here than in other countries. So banks haven’t felt enough of a financial hit from crime to justify the switch to chip cards, which are more expensive. But that may no longer be the case, as banks come under pressure from coming changes in the structure of swipe fees that banks charge retailers.

The paradox here is that the organization that manages the technology standards for the chip cards, EMVCo, is owned in part by American Express, MasterCard and Visa. So why can’t they do something to advance the chips — especially American Express, which markets itself heavily to travelers?

Marina Hoffmann Norville, a spokeswoman for American Express, said the card companies are just one player in the business. The other two are the banks that actually issue the cards to their customers and the retailers, which must adopt readers that can process the new technology. Everyone has to get on board, she said, for the switch to occur. Currently, any cards issued in the United States with E.M.V. chips must also have magnetic stripes, or they aren’t usable in domestic stores.

Randy Vanderhoof, executive director of the Smart Card Alliance, which promotes the adoption of chip cards, said big banks in the United States had been more focused recently on gaining an edge in mobile payment systems and in so-called contactless cards — another type of card that lets you pay for things by waving the card past a reader. Smaller banks and credit unions, which aren’t likely to get out in front in those areas, may see offering E.M.V.-chip cards as a way to distinguish themselves from the competition, he said.

Meantime, Mr. Vanderhoof suggested an alternative for European travelers who don’t want to be inconvenienced. Travelex, which maintains currency exchange outlets at many airports, will issue prepaid, E.M.V.-compliant cards in your choice of euros or pounds. Just load up the card before you board, and you won’t have to worry about having coming up short on your trip.

Have you encountered any troubles with your magnetic stripe cards while traveling overseas? Have you asked your bank for a chip-based card?

Article source: http://feeds.nytimes.com/click.phdo?i=87ac0d3fc1a2784ef43b41be93d8848d

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