Against long odds, EMV cards are finally coming to the United States.
U.S. issuers and card networks have been steadfast in their opposition to the EMV Integrated Circuit Card Specifications, even as the security format has become the dominant payment-card format abroad. But a growing number of U.S. consumers have encountered problems using their magnetic-stripe cards in countries that have already switched to EMV, and U.S. financial companies are starting to take note.
First out of the gate is United Nations Federal Credit Union, which was expected to announce plans today to offer an EMV credit card. Such cards have embedded microchips and can be used with a PIN to authenticate transactions at the point of sale; the PIN data is stored on the chip.
The U.N. credit union said EMV cards are a good fit for its members, who often travel abroad, and observers predicted that more U.S. financial companies are likely to follow suit.
Merrill Halpern, the credit union's card services manager, said that not offering an EMV card was a growing problem for his New York institution. "What we found is that our card was not as top-of-wallet as we wanted it to be," he said. The credit union's members "are frequently transacting in environments, especially Western Europe, where EMV is used," he said, and many have signed up for credit cards from issuers abroad that support EMV.
Members who do try to use its cards have had problems with merchants who "just don't know what to do with a mag-stripe-only card," Halpern said. "Our cardholder feels disadvantaged or embarrassed."
The credit union has 88,000 members worldwide; it serves U.N. diplomats and their families, people who often travel to countries that have adopted the EMV standard. It has 35,000 credit card accounts, including 5,000 Platinum Visa cardholders.
Halpern said the credit union plans to begin offering Platinum Visa cards in August that members can use abroad because they meet the EMV standards; the cards will also have magnetic stripes for purchases in the United States. The Platinum cards are "much more profitable" than the credit union's other payment cards, he said, and the hope is that the EMV technology will encourage more members to open platinum accounts.
EMV transactions require card readers that can gain access to the data on the chip, and U.S. issuers and card companies have long said that the cost of reissuing cards equipped with chips to every customer and installing new readers at every merchant would be prohibitive.
The credit union's strategy of limiting EMV at first to its most lucrative card "is a very clever way to get the cards out there," said Avivah Litan, a vice president and distinguished analyst at the Stamford, Conn., market research company Gartner Inc. "They're tying it to their revenue stream — they'll make more money."
Other U.S. financial companies may be moving to EMV.
USAA Federal Savings Bank primarily serves members of the military, and Lisa Carr, communications director for the San Antonio banking company, said EMV cards are on its radar.
USAA's customers would be receptive to EMV cards, she said, and though the company does not plan to issue them this year, "we are in early stages of looking at the cards."
In addition to being more convenient for travelers, Carr said, EMV cards increase security. For this reason, she said, USAA expects EMV to eventually reach a broader U.S. audience. "Our hope is that it would hit mainstream," she said.
