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The promise of EMV is a borderless credit and debit card payment system that stops fraud early in its tracks at point of sale. Why then has the U.S. been so reticent to migrating to EMV? Perhaps it is due to the fact that, as with most promises, the devil is in the details.
May 1
Against long odds, EMV cards are finally coming to the United States.
U.S. issuers and card networks have been steadfast in their opposition to the EMV Integrated Circuit Card Specifications, even as the security format has become the dominant payment-card format abroad. But 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.
First out of the gate is United Nations Federal Credit Union, which was expected to announce plans today to offer an EMV credit card. Such cards have embedded microchips and can be used with a PIN to authenticate transactions at the point of sale; the PIN data is stored on the chip.
The U.N. credit union said EMV cards are a good fit for its members, who often travel abroad, and observers predicted that more U.S. financial companies are likely to follow suit.
Merrill Halpern, the credit union's card services manager, said that not offering an EMV card was a growing problem for his New York institution. "What we found is that our card was not as top-of-wallet as we wanted it to be," he said. The credit union's members "are frequently transacting in environments, especially Western Europe, where EMV is used," he said, and many have signed up for credit cards from issuers abroad that support EMV.
Members who do try to use its cards have had problems with merchants who "just don't know what to do with a mag-stripe-only card," Halpern said. "Our cardholder feels disadvantaged or embarrassed."
The credit union has 88,000 members worldwide; it serves U.N. diplomats and their families, people who often travel to countries that have adopted the EMV standard. It has 35,000 credit card accounts, including 5,000 Platinum Visa cardholders.
Halpern said the credit union plans to begin offering Platinum Visa cards in August that members can use abroad because they meet the EMV standards; the cards will also have magnetic stripes for purchases in the United States. The Platinum cards are "much more profitable" than the credit union's other payment cards, he said, and the hope is that the EMV technology will encourage more members to open platinum accounts.
EMV transactions require card readers that can gain access to the data on the chip, and U.S. issuers and card companies have long said that the cost of reissuing cards equipped with chips to every customer and installing new readers at every merchant would be prohibitive.
The credit union's strategy of limiting EMV at first to its most lucrative card "is a very clever way to get the cards out there," said Avivah Litan, a vice president and distinguished analyst at the Stamford, Conn., market research company Gartner Inc. "They're tying it to their revenue stream — they'll make more money."
Other U.S. financial companies may be moving to EMV.
USAA Federal Savings Bank primarily serves members of the military, and Lisa Carr, communications director for the San Antonio banking company, said EMV cards are on its radar.
USAA's customers would be receptive to EMV cards, she said, and though the company does not plan to issue them this year, "we are in early stages of looking at the cards."
In addition to being more convenient for travelers, Carr said, EMV cards increase security. For this reason, she said, USAA expects EMV to eventually reach a broader U.S. audience. "Our hope is that it would hit mainstream," she said.
Litan predicted that other financial companies will follow the U.N. credit union's lead.
"As far as I know, this is the first bank or credit union to go this route," she said. Larger banks have contemplated issuing EMV cards for years but have stayed on the fence. No one wanted to be first, she said, but now that the credit union has taken the plunge, others should be quick to follow.
"They'll be limited to travelers for at least two years," she said, but as more travelers get the cards, it will become increasingly easy to persuade U.S. merchants to buy EMV-reading terminals and take advantage of the added security these cards offer.
EMV "should spread, gradually, to the United States because, as more people get the cards in their hands, the barrier to entry gets reduced," Litan said. The U.N. credit union is "biting the bullet, but they're also reaping the returns," she said.
For now, the big U.S. issuers seem to have no interest in offering EMV in the United States.
Before the credit union's commitment to the format, the closest the U.S. has come to getting an EMV card was JPMorgan Chase & Co.'s International Dollar Card, which carries U.S. funds but is only issued abroad — a U.S. resident would need an overseas address to get one. JPMorgan Chase has repeatedly stressed that it has no plan to issue any EMV product in the United States.
A Citigroup Inc. spokesman would not discuss EMV, but wrote in an e-mail, "We continuously monitor developing payment technologies."
The credit union had been mulling an EMV card for at least three years but was able to move ahead only after the Dutch card maker Gemalto NV introduced its World Traveler program specifically to help U.S. financial companies develop EMV products.
"Gemalto acted in a vendor role but also in a consultancy role, and they were very instrumental in helping us launch this," Halpern said.
Jack Jania, Gemalto's vice president and general manager of secure transactions in North America, said his company "helped bring all the players to the table," notably Visa Inc. "We can help newcomers to EMV navigate all of the issues," he said.
Brian Byrne, a senior business director in charge of chip products for Visa, said the New York credit union's interest in offering EMV sparked a good bit of internal communications within the San Francisco payments company because no other U.S. financial company had ever requested an EMV card. "It's not an everyday query," he said.
Now that the way has been has paved, more U.S. banks would likely have an easier time, he said.
Normally, he said, "it's not an issue for Visa to support chip-card issuance," since it does that already in many other countries. The credit union's needs were "somewhat of a unique situation for us in the U.S. market," he said.
Byrne could not say whether any other bank or credit union has asked to issue chip cards but said he does not foresee an avalanche of imitators. If others do follow, they will probably market EMV cards in limited quantities, he said, for example, to travelers.
