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Friday March 26, 01:22
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Contact-Based Chip Cards Unlikely To Fly In The US
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Target Corp’s abandonment of its chip card program after three years of operations proves that US retailers do not need to invest in a chip card infrastructure, argues David Weisman, of AMR Research. Although Target had converted 9 million of its 36 million Visa cardholders to chip cards as of this month, Weisman asserts that cash, checks, credit, debit and gift cards already satisfy consumers’ needs. Since retailers have invested in PINpads for credit and debit cards, Weisman does not expect chip card readers to be added to an advanced payment infrastructure that relies heavily on online verification for security.
As the second-largest retailer in the US, Target “was essentially alone in trying to stimulate smart card acceptance at the merchant level”, the European Card Review cites First Annapolis Consulting partner, John Grund, as saying. Grund, like AMR Research’s Weisman, believes Target’s experience with chip cards will deter US retailers and banks from investing in chip cards, particularly as the POS infrastructure would need significant investment. US issuers may only change their stance on chip cards in the face of significant card fraud in the US following EMV migration in other world regions, according to the ECR.
Weisman also asks how banks will make money from issuing or routing transactions if smart cards are rolled out in the US, given the ongoing battle over interchange between retailers and the card schemes. In fact, Weisman concludes that contact smart cards “likely will never find a home in the United States”, while the ECR also notes that major card issuers like Citibank, MBNA and JP Morgan Chase “have not undertaken much significant EMV activity in the US”. Ultimately, the ECR predicts criminal rings to copy data from the initial hybrid mag-stripe and chip cards, and to send it to the US for fraudulent payments.
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