What Brits Need to Know About New U.S. Chip Cards

The chip-and-PIN has been standard on our side of the Atlantic for well over a decade, but while we have been dipping (and receiving the various security benefits that dipping boasts) Americans have continued to prefer the old-fashioned swipe.

Fortunately, this year, the Yanks’ banks are making a massive switch over to the EMV standard, meaning the U.S. should be much friendlier to our microchipped forms of payment. Unfortunately, there are more than a few American augmentations that make our chips and theirs a bit different from one another.

Why the Switch Took So Long

Every European is well-aware that the shiny microchip implanted in our debit and credit cards has effectively cut down on fraudulent spending by more than 13 percent (saving the U.K. alone a staggering £65 million in just the first year), so how could a country that purports to be so financially savvy ignore the chips for so long? There are several reasons:

• Scale. America is big: The country boasts more than 10 million card terminals and 1.2 billion cards. Not only is it difficult to get such a large market to adopt change, but the cost of making that change has been worryingly substantial.
• Responsibility. Card transactions in the United States are never simple; congress, vendors, banks, and credit card companies have been at war for years over who pays fees required for interchange and transaction, so the debate about who would foot the bill certainly stalled the transition to chip cards.
• Alternative technology. Experts predict that developed nations will soon prefer mobile payment systems over cash and cards, and many U.S. banks hoped Americans would skip chip cards and advance straight into future technology.
• Fraud rates. Perhaps surprisingly, America once had some of the lowest credit fraud rates in the world, so while Europe was switching to chip-and-pin, the U.S. didn’t see any rush. Unfortunately, with the adoption of chip cards, the rest of the world gained protection while U.S. fraud rates became worse and worse; the most recent spate of security breaches among retailers has finally forced banks’ hands.

Despite banks, credit companies, and even cardholders dragging their feet, inventing myths that stalled EMV card acceptance, Americans must have access to chip cards starting this month. Unfortunately, they aren’t exactly like the ones we’ve come to know and love.

The Main Differences

While they may look similar from the front, British chip cards are actually quite different from American chip cards. For one, a vestigial magnetic strip remains printed on the back of U.S. cards. Though American venders had until this month to prepare for new cards and procure the appropriate dipping technology, but 1 October was certainly not a hard deadline.

In fact, it is suspected that a vast majority of brick-and-mortar merchants still rely on swiping those magnetic strips. As long as cards retain the strip, retailers have little reason to make an expensive change to EMV-ready devices.

Perhaps more significantly, American chip cards do not require a PIN. The chip-and-PIN is flawless technology that practically ensures the cardholder is the only person who can use the card. Americans have ditched the PIN in favour of chip-and-signature cards. Rather than entering a PIN to verify an identity, cardholders will produce a signature that ideally matches the one on the back of their cards.

Alas, requiring a signature does little to validate identity, and there are several reasons chip-and-signature is not as secure as chip-and-PIN. Untrained workers may make the transition to chip cards more confusing by misunderstanding the technology and ignoring the need to verify signatures; besides, relying on the diligence of cashiers is rarely a sound strategy for preventing theft and fraud anyway.

Worse, chip-and-signature cards may be all but useless at unmanned automatic payment kiosks, which are becoming ever-more popular around the world. Yet, due to bank and credit company supremacy in the U.S., chip-and-signature has won out.

What to Expect on Trips Abroad

Fortunately, the divide between U.K. and U.S. chip cards shouldn’t be enough to cause any serious inconveniences for international travellers. Most chip-capable point-of-sale machines should be smart enough to detect whether a PIN or a signature is necessary for a certain transaction, and cities frequented by business travellers will likely have more merchants who are familiar with the new form of payment.

If worse comes to worst, travellers can always use bank ATMs, which have long employed chip-capable, dipping technology, to withdraw appropriate currency and hope that in the next few years we’ll all be paying with our smartphones anyway.