For Americans, Plastic Buys Less Abroad
By MICHELLE HIGGINS
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(American) cards, which rely on magnetic-stripe technology for transactions, lacked an embedded microprocessor chip, which stores and processes data and is now commonly used in Europe. Such chip-based cards — commonly referred to as chip-and-PIN cards because users punch in a personal identification number instead of signing for the purchase — offer an extra layer of protection against the theft of cardholder data and counterfeiting, and they are designed to replace magnetic stripe technology and signature payments.
The chip-and-PIN technology usually isn’t much of an issue when making purchases at a store, or paying for a meal in a restaurant, as most of those merchants still have credit card terminals that can read the magnetic stripes. Likewise, A.T.M.’s typically recognize and accept many cards whether they have a chip or a magnetic stripe. But American cardholders have had their cards rejected by automated ticket kiosks at train stations, gas pumps, parking garages and other places where there are no cashiers.. And as more countries around the world move to chip-and-PIN cards, it’s inevitable that Americans will encounter more difficulties paying for things abroad.
Twenty-two countries, including much of Europe, Mexico, Brazil and Japan, have adopted the technology, according to the Smart Card Alliance, a nonprofit association that promotes chip cards. About 50 other countries are in various stages of migrating to the technology in the next two years, including China, India and most of Latin America, according to the association. In the last year, Canada began rolling out chip-and-PIN cards and plans to stop accepting magnetic stripe debit cards at A.T.M.’s after 2012 and at point-of-sale terminals after 2015. These governments like the cards because they reduce fraud. With an embedded microcontroller, large amounts of data can be stored on the card itself rather than in a central database, and counterfeiting such a card is difficult.
But the United States banking industry has no immediate plans to adopt the technology. Part of the reason, experts say, is that fraud issues haven’t been as prevalent here as in other countries. The expense of converting the country to chip-and-PIN technology is also a deterrent. Javelin Strategy and Research, a consulting company for the financial services industry, has estimated the cost for the United States’ to migrate to the technology at $5.5 billion, mainly for new payment terminals — an expense that neither retailers nor banks want to shoulder.
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CREDIT card issuers acknowledge the problems but offer few solutions at the moment. Randa N. Ghnaim, a spokeswoman for Visa, said the company was working with banks and merchants across Europe to ensure that they accept magnetic stripe cards in addition to chip-and-PINs... And at least one company, Travelex, the global payment services company, says it is working on a chip-and-PIN card for Americans that could be loaded with up to 6,000 euros or £4,500 — about $9,000 or $7,400 at recent exchange rates. But that solution is still at least a year away... But realistically, it’s not a huge problem, and there are ways to work around it. You can still buy things like train tickets and subway cards online ahead of time, carry traveler’s checks or simply pack a lot of cash.
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http://www.nytimes.com/2009/10/04/travel/04pracchip.html
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