Via Emily in the comments comes word that a credit union has become the first USA-based credit card issuer to offer its customers chip-and-PIN as well as swipe-and-sign payment options.
It’s probably no surprise that the credit union in question is one with a highly mobile and international user base: the United Nations Federal Credit Union, whose membership is limited to employees of the UN, a limited set of affiliated organizations, and family members of existing members.
However, despite being rolled out by a niche provider, this is still a big step for the American credit card industry. It opens the door for what could potentially be a huge upgrade for American residents traveling internationally, especially to Europe.
Adding the chip-and-PIN option doesn’t remove the functionality of the magnetic stripe. It just adds a feature that wasn’t there before, much like the RFID-based “tap-and-go” chips that some large issuers have added to their cards in recent years.
For banks with large numbers of international transactions, the addition of the chip sounds like a winning proposition:
The chip and PIN system has lowered the incidence of card fraud at the point of sale in the countries where it has been implemented, but critics have pointed out it has led to an increase in Internet or other “card not present” fraud.
Merrill Halpern, the card services manager for UNFCU, explained that the credit union had been contemplating starting to issue the cards for a while, both to better serve its international membership and to limit the CU’s exposure to card fraud. Halpern would not share specific numbers to illustrate the credit union’s card fraud but noted that it was significantly higher than for other financial institutions, including banks.
Part of the reason for the higher than average fraud incidence is that other credit unions with primarily U.S.-based memberships can, for example, automatically decline card transactions from some overseas countries perceived to have a high risk of card fraud to protect themselves from losses. But with its 88,000 members spread across 205 countries, Halpern pointed out that option is less feasible for UNFCU. Further, its members had started to complain about the lack of the chip and PIN cards, particularly when traveling on U.N. or other business.
This doesn’t mean that the chip-and-PIN system will be in use at any American terminals yet. That’s a sizable infrastructure investment that seems unlikely to occur anytime soon.
And while the addition of Chip-and-PIN would speed in-person transactions for American banking customers abroad, and allow Americans to use automated gasoline pumps, ticket vending machines, and parking fee machines in Europe, the system still has its flaws. Security isn’t guaranteed (much as it isn’t with a swipe-and-sign setup), with some semi-comical results.
Still, I’m still hopeful that this credit union’s experience is positive, and that more banks and credit unions follow through as well. It would be a big boon to frequent international travelers.
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June 15th, 2010 at 12:20 pm
This actually isn’t the first chip-and-pin card issued by a US bank. When it was originally launched, American Express’s Blue card featured a smart chip (advertising touted this feature, though I don’t recall it explaining why a customer would want one). They’ve since switched to using an RFID chip instead in the card.
June 15th, 2010 at 1:43 pm
David, the Amex Blue was a little different. The chip was only useful in conjunction with a device that you would connect to your computer, when making online purchases. The Amex chip was never useful at a point of sale offline, so it wasn’t chip-and-PIN the way it’s used in the rest of the world. So it was pointless. (I had such an Amex Blue. I never got the device, and I never used the chip or knew my PIN.)
June 15th, 2010 at 10:28 pm
Thanks Mark. I never had one of those cards so all I knew was it had a chip of some sort. I actually had a chat with an Amex customer service rep over the phone after they sent me a new card when they replaced all the Starwood Amex cards with cards that had RFID chips. Considering how poorly we’ve done wireless security in the past, I tend to think that RFID credit cards are a bad idea. I disabled the feature on my account, but the card itself doesn’t know that and could conceivably still transmit information to a rogue scanner. It’s not hard to see where the chip is on the card, so I gave it a couple of good hits with a hammer.
June 15th, 2010 at 10:44 pm
I applaud the use of the hammer to disable RFIDs. Bravo, David.
Now I need to check my Starwood Amex to see if it has an RFID. I know my Chase Visa does…
June 16th, 2010 at 11:14 am
Just looked and ThinkGeek sells an RFID blocking wallet.
June 16th, 2010 at 4:25 pm
Amazing to sit and watch as America catches up with the rest of the world! (Just some gentle ribbing here!) ;.)
Our Dubai cards and bank goes the whole way – we had chip and pin plus, on the back left top of the card above the signature, there was a mugshot of the cardholder imprinted on the card. We could use our bank cards for ID.
Added to that, whenever we travel and make an international purchase on our cards, within 5 minutes of the transaction, the bank phones us on our Dubai cellphone #s to confirm that we did make the purchase. All transactions are also confirmed by text messages to our phones.
They take credit card security very seriously!
June 16th, 2010 at 6:10 pm
Mark, I’m pretty sure your Starwood Amex does, unless you’re somehow still using the old blue one. The red ones have the RFID chip. If you hold it up to the light just right, you should see a little square somewhere above the ExpressPay logo on the back (ExpressPay is what Amex calls their RFID system) but below the magnetic stripe.
Michele, at least one bank in the US (Bank of America) offers a photo on the front of card as an option on their debit cards.
June 17th, 2010 at 10:27 am
David – yes we were given that option at B.o.A., but they don’t phone us or text us when we use the card.
June 17th, 2010 at 6:30 pm
I used to have a (Citi?) credit card with my photo on it maybe 10 years ago. You simply had to authorize them to pull the photo from your state’s DMV.
I didn’t know that the SPG Amex has an RFID chip. Have to check mine when I get home. Where can I use it (so I can test the hammer surgery?)
June 17th, 2010 at 9:39 pm
David, you’re right, my Starwood Amex has the RFID chip. HAMMERTIME.
Oliver, I’ve seen the RFID readers at CVS… and that’s about it. You wave the card over the card swipe terminal, and it doesn’t require a signature. I look forward to your test results.
June 18th, 2010 at 5:47 pm
[...] Some interesting news about a US-based Chip+PIN card being available … sorta Click here for the story … [...]
June 18th, 2010 at 7:02 pm
[...] reader over at the Upgrade Travel Better blog tells Mark Ashley that the United Nations Credit Union will soon be the first in the states to [...]
June 30th, 2010 at 12:16 pm
RFID technology is used much more in the US than people realize. Many credit cards even debit cards now have RFID and most people don’t even realize it. I found some inexpensive RFID card blocking sleeves for my cards and passports on a site called theftdefender.
July 19th, 2010 at 8:53 pm
[...] Odds of chip-and-PIN in the US A month ago, I blogged about the United Nations Federal Credit Union bringing chip-and-PIN credit cards to its American customers. That isn’t a huge customer base to be pushing a new technology. But what if a bigger player [...]
September 2nd, 2010 at 4:17 am
Its interesting that the US is only just adopting the technology, it has been around for sometime here in the UK. It has worked to reduce fraud but certainly hasn’t eliminated it as it was once thought it would. This may be because of the interntional nature of credit cards, machines still have to be able to accept non chip and pin cards from other countries. The new thing here is contactless, a card that doesn’t require a pin number for transactions under £10.
September 2nd, 2010 at 6:28 am
Contactless — where an RFID chip in the card is waved near the payment terminal, but no PIN is entered or signature required — has been available in the USA for some time. It’s just not very widely used.