The U.S. banking industry’s reliance on mag-stripe credit and debit cards threatens to turn the country into a magnet for more card-based fraud, said a payments executive with the Federal Reserve Bank of Atlanta in a blog posting last week.
Richard Oliver, executive vice president of the Atlanta Fed’s Retail Payments Risk forum, said that regulators’ reluctance to require more secure technology threatens to isolate the U.S. as a target for fraud rings and criminals thwarted by chip-embedded smart card technology available in Europe, Canada and other parts of the world.
"That means that criminals, intent on profiting from card fraud, will continue to migrate to the United States in growing numbers," says Oliver, who is also responsible for managing the Fed's global check and ACH businesses.
While banks are experimenting with chip-embedded technology that is already at the heart of a nascent mobile-phone based payments standard – near-field communications, or NFC –smartcard adoption is hindered by the reluctance of merchants to bear the cost of six million new payment terminals that would be required for conversion to the EMV standard (derived from a cooperative agreement between Europay, MasterCard and Visa).
“We are likely to have to travel a long and winding road to migrate to the emerging global standard,” warns Oliver. U.S. citizens traveling abroad are already running into compatibility problems in using their mag-stripe cards in countries where ATM machines and point-of-sale terminals have been adapted to read only chip-embedded cards.
Oliver proposes that the government initiate a public policy directive to begin the changeover to an EMV standard in the U.S., much like the digital TV broadcast conversion completed in 2009.
“If we want to mitigate the possibility of the United States being a center of card fraud and enable our consumers and business folks to travel abroad more easily,” says Oliver, “it may be time to charge someone in government with developing a well-thought-out, participatory, multi-year plan to move this country to the emerging global payments card standard.”
