U.S. banks may be dropping their resistance to one of the world's fastest-growing payment card security formats, despite the prospect of increased costs.
While much of the globe has implemented the EMV Integrated Circuit Card Specifications or is planning to do so, U.S. issuers have steadfastly opposed the format, balking at the expense of replacing millions of cards and readers.
That attitude may be softening, however, as banks confront a growing number of customers returning from trips complaining they were unable to use their U.S.-issued cards abroad.
Jack Jania, the vice president and general manager of secure transactions in North America for the Dutch smart card manufacturer Gemalto NV, predicts that a U.S. bank will offer EMV cards "this year," most likely to customers who travel often and request one.
The mood is definitely shifting, according to Gemalto. "Two years ago, I would walk into meetings with my sales team, and no one would even talk to us about this," Jania said. "The motion here is much different than it was two years ago. You're seeing a very wide cross section of issuers from all over the country taking this seriously now."
Part of the reason for this change is that the banks' customer service departments are hearing about the issue more frequently. Jania said that a year ago he talked to one banker who said his company's response to frustrated travelers who could not use their cards abroad was to simply issue another mag-stripe card. EMV cards have microchips, and users enter a PIN to make purchases.
This behavior is not winning banks any fans, Jania said. Travelers who can't use a card abroad will stop using them during their trip, and "that card tends to stay at the bottom of the wallet when they get home," he said.
Merchants in countries that have shifted to EMV are required to accept standard magnetic-stripe cards issued in non-EMV countries, but many U.S. travelers have reported problems using their cards, especially at smaller merchants and automated kiosks.
Randy Vanderhoof, the executive director of the Smart Card Alliance said, "I really expect that we will see cards being issued this year" by U.S. banks with EMV chips.
Awareness of the EMV issue grows each time a U.S. traveler's card is turned down overseas, he said. "Enough people have had the experience of what happens when you don't have one" with an EMV chip in it, he said.
Rachel Schain, a Wilmington, Del., musician, can testify to that. Schain encountered several payment problems during a 2008 trip to the U.K.
Some merchants charged her a fee for using a mag-stripe card, and the automated kiosks at a train station would not accept her card. Instead, Schain said she had to purchase tickets from a clerk, where a miscommunication led to her paying more than necessary.
Her card problems also caused an awkward moment at a pub. "It was my turn to buy the round, and I went to go buy the round, and they wouldn't take my card," she said. "I felt so embarrassed."
Nick Holland, a senior analyst at Aite Group LLC, said that consumers will often change their payment habits when cards are declined abroad. "A bad experience will mean that they essentially punish that card when they come back," Holland said. "I don't think [issuers] have realized how much people are hurting."
In a September Aite survey of 1,019 U.S. cardholders who have traveled abroad, 62% said that issues using a mag-stripe card led them to stop trying to use it during the trip; many used the card less often upon returning.
"As the rest of the world goes into EMV lockdown, the problem is only going to get more exacerbated for U.S. travelers going overseas," he said. "It's going to become something that they can't ignore anymore."
(Schain did not punish her issuer, JPMorgan Chase & Co. "The people giving me trouble were the people behind the counter, not the ones at the bank," she said in an interview Wednesday.)
JPMorgan Chase has already taken a very small, tentative step toward EMV. Last year it announced plans to offer an EMV card for U.S. currency, but it is aimed at residents of other countries who want to conduct transactions in U.S. dollars.
However, the International Dollar Card is not available within the United States, and a JPMorgan Chase spokesman confirmed this week that the New York company has no plans to issue the International Dollar Card or any other EMV credit card in this country.
Gemalto is trying to make it easier for issuers to develop EMV products for the U.S. market. It announced last week its World Traveler program to help banks evaluate the costs, and potential returns, of offering EMV cards.
The program would also help banks support the cards. For example, since the cardholders' PIN would be infrequently used, the Gemalto program would enable issuers to send customers a PIN reminder by text message.
Jania would not say whether a issuer has signed a contract to issue EMV cards to U.S. residents. He said that when an issuer does announced an EMV program, it would likely focus on travelers, not domestic spending.
"It will be small, and it will be targeted," he said.