The Advent of Chip-And-Pin Credit Card Technology in the United States

Recently, a data breach that compromised the financial information of tens of millions of credit card customers across the United States prompted Target’s chief financial officer, John Mulligan, to fast-track the implementation of a more secure payment card system. The system he referred to while testifying on Capitol Hill this month uses what is known as chip-and-pin technology. This technology involves a credit card that has no visually overt information printed on it such as card numbers, expiration dates, card holder names, and security codes. All of that information is stored on an encrypted microchip that is embedded into the card itself. Using the card at retail outlets is simply a matter of inserting the card into a point-of-sale payment machine and the customer entering a predetermined personal identification number (PIN) to verify his or her identity.

Although most Americans may perceive this kind of technology to be state-of-the-art, it has actually been in use in several other countries around the world, particularly Europe, for a number of years already. And the security element of the chip-and-pin credit cards has proven itself as evidenced by the significant decline in credit card fraud in places like Canada and the United Kingdom where the technology has been in place for years. MasterCard and Visa have committed to the transition from old to new credit card technology in the United States and expect to have it fully implemented by October 2015.

The main reason for the United States lagging behind the rest of the world in putting the chip-and-pin credit card technology in place is the cost involved. The chip technology itself is estimated to be roughly seven times the cost of traditional cards just for manufacture, which is to say nothing of adding personalized customer information to the chip which is double the cost of adding it to the black magnetic strips that everyone is used to. Point-of-sale terminals cost more as well. But the increase in the security of personal financial information is expected to be well worth it.

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