With the recent data breaches at Target, Neiman Marcus and Michaels, many consumers are asking why the United States has been so slow to move away from the magnetic strip credit card.
Europe has made great strides to adopt chip and PIN technology as a way to curb identity theft for its cardholders. According to a Retail Payments Risk Forum study, fraud losses in the United Kingdom since widespread adoption to the these cards in 2004 has decreased 34 percent.
Perhaps the biggest reason is because, according to a New York Times report, it would cost an estimated $15 billion to completely transition the country to a new chip and PIN card system. There are approximately 10 million credit card terminals in the United States at this time, serving over 1.2 billion cards. This country has one of the largest credit card systems in the world. Changing that would be a big expense.
Who would pay for the transition? Would it be the retail stores that have the credit card processing machines, or the banks and card companies like Visa and MasterCard? Until that $15 billion question is answered, there is no telling when the United States will get rid of its outdated processing.
Randy Vanderhoof, executive director of the Smart Card Alliance, said, "Now we have an escalating rate of fraud that is creating a business need to address (this) more aggressively than five or 10 years ago."
In regards to chip and PIN technology, Vanderhoof said, "There's no central authority or regulation that requires the U.S. market to do this. We have to rely on the payment brands, financial institutions, and merchants to all come together and agree this is the best investment for everyone."