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This week, Travelex Currency Services Inc. began issuing more secure chip and PIN prepaid cards at its 180 U.S. retail sites, a tune-up for broader distribution to about 2,000 retail banking partners — such as U.S. Bancorp and HSBC — in early 2011, said Jon Dario, the company's president and North American currency services regional division director.
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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.
May 13
Wells Fargo & Co. is planning to issue 15,000 EMV cards to U.S. residents in a test this year, making it by far the largest bank to offer the smart cards to domestic customers.
The U.S. has long resisted the transition away from magnetic stripe cards to EMV cards, commonly called chip and PIN for their most prominent security feature. The current options for U.S. customers are few and far between, and experts said Wells Fargo's test, which it plans to announce Wednesday, should lead many more issuers to embrace the EMV Integrated Circuit Card Specifications.
The broad international adoption of chip-and-PIN cards has caused problems for U.S. residents who want to use their cards when they travel overseas. Merchants accustomed to EMV cards resist mag-stripe cards, and many kiosks are not designed for cards that lack EMV chips.
Eric Schindewolf, vice president of product development for Wells Fargo's consumer credit card business, said the test is meant to improve the experience its customers have when traveling abroad.
"The world is getting smaller," Schindewolf said. "We selected customers that travel frequently outside of the country. Those are the ones that are going to use the card and provide us the greatest feedback."
Most EMV cards use the embedded chip to enhance security at the point of sale by requiring a PIN, which is verified by the chip on the card. For this process to work, merchants must also update their terminals to allow them to communicate with the EMV chip.
Wells Fargo is first offering EMV cards to people who frequently travel internationally. They will be notified in the "near future" and receive the cards by midsummer.
"I do think there will be several other U.S. issuers that will be following suit," said Stephanie Ericksen, Visa Inc.'s head of chip product integration. "It's a trend that's starting to take off a little bit more."
Many travelers have complained about difficulty in using magnetic stripe cards in countries that have switched to EMV. Though merchants are supposed to accept cards without chips, many mistakenly turn travelers away. Kiosks are known points of friction for mag-stripe cardholders.
The Wells Fargo cards include traditional mag stripes across their backs, so they can still be swiped for domestic transactions.
The Wells Fargo test "is going to help ultimately get issuers more comfortable with issuing chip-and-PIN cards in the U.S.," said Gwenn Bezard, co-founder and research director at Aite Group LLC. "Once you have done the fine-tuning with your cards system, then you can scale. It's scaling it that will not be a big deal."
Wells Fargo is the largest issuer to date to test smart cards publicly in the U.S., but others have made the cards available to U.S. residents since last year.
In late 2010, for example, Travelex Currency Services Inc. began issuing secure chip-and-PIN prepaid MasterCards in foreign currencies at its 180 U.S. retail sites. At the time, the card marketer said it was planning on involving its roughly 2,000 retail banking partners, which include large banks such as U.S. Bancorp and HSBC Holdings PLC.
West Suburban Bank in Chicago is the issuing bank for the Travelex Cash Passport cards. A Travelex spokeswoman did not immediately return an emailed request for comment.
There are credit unions that issue EMV cards as well.
United Nations Federal Credit Union in October sent out 7,000 chip-and-PIN platinum Visa cards to its members, who come from — and go to — all corners of the world.
Ericksen said that credit union deal, which involved cards from Gemalto NV, made larger banks take notice.
"We have been talking to several U.S. issuers that are asking us if we support [EMV cards], asking: How would they do that? What vendors should they be working with?" Ericksen said. "We have been sharing our experience."
There are also U.S. merchants working toward making EMV cards available in the U.S.
All Wal-Mart U.S. payment terminals are able to accept chip-and-PIN transactions. That initiative is meant to serve residents of other countries who want to make purchases in the U.S.
In an outlook published in December, Aite Group predicted that by 2015, either the Federal Reserve Board or the major card networks would mandate EMV.
Others disagree.
Current EMV deployments, which remain focused on travelers, are "not intended to be mainstream," said Brian Riley, a research director in the banking cards practice at TowerGroup. "It's a select market. I think in the long term, they'll end up charging fees."
He added that for the U.S. to eventually adopt this technology makes little sense. "The technology goes back to the days of Jimmy Carter," Riley said.
"EMV is weak on the hottest-growing segment of card transactions, which is card not present, and until it has a viable solution for that, why adopt this for anything other than interoperability?" he said.
