With the continued upgrading of the Canadian payment infrastructure to the EMV smart card standard mandated by Europay, MasterCard and Visa, can widespread U.S. adoption be far behind? Yes, say some experts, who believe widespread use of EMV-standard smart cards in the U.S. may be as far as a decade away.
Despite isolated product introductions including the American Express chip-enabled Blue card introduced in 1999, the U.S. adoption of EMV significantly trails Europe, Asia and now Canada.
More than 100 million Canadian credit and debit cards will need to be converted to EMV, according to a deadline set by Visa Canada (MasterCard has yet to follow suit). Visa Canada has announced its intention to have the newer cards reach "critical mass" in the marketplace by 2010, but the association is allowing members to move at their own pace, says Allen Wright, director of chip initiatives.
"There are large infrastructure changes involved which take time," he adds, predicting that the Canadian market won't see widespread use of the cards before 2007.
One sign of the movement in progress: The opening by Paris-based technology firm Axalto of a "personalization and fulfillment" plant outside Toronto to support the Canadian issuer market, with immediate deliveries planned to one financial institution. "Smart cards are the future, and the future is arriving in Canada," says Axalto marketing manager Rahul Gadkari.
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The significant advantage of chip cards over the magnetic stripe of a debit or credit card is security. Instead of storing account information on the magnetic stripe, smart cards store it on a computer chip, where it can be better protected. Merchants in other countries have suffered so much through fraudsters' skimming personal information off mag stripes that EMV has become a mandated standard. European card issuers faced a deadline of January this year to convert to EMV smart cards although many have lagged. More than 50% of issuers in the United Kingdom reported being in compliance early this year, says Skip Williams, general manager at Nexus Software, a middleware provider based in Raleigh, N.C.
Americans' greater reliance on checks and cash is the reason often cited for the delayed migration to EMV. In the U.S., American Express promotes Blue's "added level of security and for shopping online and convenience for navigating the Web." Chip cards also enable the downloading of scripts to add card features, block future use or target specific customer segments for the purpose of offering specific incentives to encourage use. These personalization features, as much as the added security, are believed to have ultimate appeal to American card-users.
"I believe that everybody will migrate to the EMV standards," Williams says. "But the crystal ball for the U.S. is fairly cloudy." He estimates wide adoption of the technology in the U.S. to be five to 10 years away. The migration to a chip card-issuing environment is known to be much more complex and will require extensive planning.
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