Wednesday, 28 December 2011

Chip-And-PIN Technology Catching On in the USA

Credit cards based on chip-and-PIN technology continue to make inroads in the United States, according to two recently released studies. It's time for merchants - and their merchant services providers - to brace themselves for the transition from magnetic stripe to chip-and-PIN credit card processing.

Chip-and-PIN relies on a microprocessor chip to store account data on the card and a PIN (personal identification number) to "unlock" it at the point of sale. Also known as the EMV (Europay-MasterCard-Visa) standard, it is considered more secure than the mag stripe technology that has been the basis of credit card processing for more than 40 years. Few great technological inventions such as the credit card mag strip have endured for so long without any innovations.

The United Nations Federal Credit Union (UNFCU) reports one year after it introduced a chip-and-PIN card in the U.S. that there was a 20% jump in revolving balances from October 2010 to February 2011 compared to the same period the previous year. Additionally, total purchases on the card jumped 15%, and applications for the card soared by 153%.

JPMorgan Chase and Wells Fargo have followed UNFCU's lead, separately releasing their own chip-and-PIN cards earlier this year. Like the credit union, the two banks targeted customers who are frequent travelers abroad and often encounter problems using their mag stripe credit cards.

More than 2.5 million EMV cards are expected to be released to U.S. cardholders in 2011, according to the Aite Group, a leading independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry. Its recent study shows an increased optimism about chip-and-PIN among card security professionals in North and South America.

Nineteen percent of those surveyed agreed that the credit card processing technology will migrate to the U.S. in the next year or two; in a previous study in 2009, no one agreed. A much larger percentage (73%) indicated that EMV has a high impact in reducing fraud; two years ago, only 48% thought so. Still, 55% of the respondents predicted that the replacement of the mag stripe will take seven years or more.

"Card industry executives believe that EMV in the United States is no longer a matter of if, but of when," senior Aite analyst Julie Conroy McNelley told Digital Transactions, a publication that reports on trends in the payment processing industry. "The relevance of the magnetic stripe has disappeared."

Consumers and merchants, you've been warned.

Marc McDermott is the Online Marketing Manager at Merchant Express, a provider of merchant services and payment processing technologies with a specialized approach to merchant credit card processing, merchant bankcard processing and transaction processing services.

View the original article here

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