The U.S. credit card industry is lagging behind Europe, Latin America, Canada and parts of Asia in adopting the latest credit card safety technology. Better known in the banking industry as chip-and-pins, these new credit cards encrypt cardholder information in a chip that requires the user to use a personal identification number (PIN) at the point of sale whenever they make a purchase. With a security code that cannot be changed, the new cards are more difficult to duplicate and provide extra levels of security over magnetic-strip cards.

International scam artists are beginning to take notice, making the U.S. market more vulnerable to theft. Wes Wilhelm, senior analyst with the Aite Group, speaking on the increased fraud rates in the U.S., estimates credit card fraud losses of between $8 billion and $10 billion.

The main reason for the reluctance revamp is due to the cost. For example, chip and pin cards cost almost ten-times that of traditional magnetic strip cards. The change will be a daunting task for issuers and merchants who currently use millions of point-of-sale terminal that accept the magnetic strip cards requiring modification. But as losses increase, banks are becoming less resistant to making the change.

Companies and Organizations Making the Switch

  • United Nations Federal Credit Union in New York is making the transition after their members began complaining that the magnetic-strip cards were useless in Europe, the inconvenience resulted in cardholders using their credit and debit cards much less when traveling abroad. The credit union expects to pay approximately $6 for the new chip-and-pin cards, compared with $.50 to $.60 cents for every magnetic-strip card.
  • Wal-Mart, Inc., the world’s largest retailer, will begin rolling out the new technology to handle the newer cards worldwide. “It’s time for chip-and-PIN in the U.S.,” Jamie Henry, Wal-Mart’s director of payment services.
  • Government agencies, U.S. military, State of Texas for residents enrolled in their food stamp program.

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