A chip on the old card: Americans will soon see a new patch of technology on their familiar charge cards

By Joan Verdon

The Record (Hackensack, N.J.) (MCT)

Published: Sunday, June 30 2013 12:00 a.m. MDT

In this Nov. 18, 2009 file photo, a Mastercard chip-based credit card is posed for a photo in Gelsenkirchen, Germany.

Martin Meissner, Associated Press

Enlarge photo»

HACKENSACK, N.J. — Stores in North Jersey and around the country are gearing up for the next generation of credit cards, and consumers can expect to see changes in checkout aisles and in their wallets in coming months.

The so-called smart cards — credit cards with embedded computer chips that can store large amounts of data and perform functions like encryption — are being hailed as the cure for data breaches that have hit major retailers the past year. The Target data breach in November and December, when cybercriminals stole information from credit and debit cards as well as the email and home addresses of more than 110 million customers, has given new urgency to calls to replace magnetic-stripe cards that can easily be copied by thieves and are vulnerable to fraud.

“We are seeing a lot of reaction as a result of the publicity surrounding this and a recognition that we need to have more robust systems to keep these 21st century hackers from compromising financial information,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation.

Banks and retailers are investing in chip-card technology in a big way. Some 100 million chip cards are expected to be issued this year, but that is a tiny fraction of the 1.7 billion credit and debit cards in use in the United States. Retailers are on track to have 4.5 million chip-card readers installed in their stores by the end of this year. Chip-capable card readers can be seen in the checkout aisles at Home Depot and Kohl’s stores in North Jersey. Wal-Mart’s Sam’s Club warehouse division began issuing a Sam’s Club chip card this month, and activated the chip readers already in place in its stores.

But the National Retail Federation, the nation’s largest retail industry group, is cautioning that retailers need to make sure they are investing in the smartest ways to protect customer data before spending billions.

Chip cards have been widely used in Western Europe since about 2008 and have been credited with dramatically reducing credit card fraud. They also are cited as a key reason foreign data thieves have increasingly targeted U.S. retailers in recent years.

The cards are usually described as having EMV technology — short for Europay, Mastercard and Visa, three card companies that developed a set of standards for chip-card compatibility.

The EMV Migration Forum, an organization that includes financial institutions, retailers and payment processors, was established to bring the various members together to introduce EMV technology in this country. It is based in Princeton Junction.

Randy Vanderhoof, director of the EMV Migration Forum, said the U.S. is going through the primary shift toward EMV chip cards, when card issuers are starting to send chip cards to consumers and merchants are replacing existing card readers with EMV-capable systems.

“Over the next year, we’ll be seeing this rapid number of merchants that will suddenly start to get their systems enabled and active and online, and those consumers who have received cards from their financial institutions will be told how to use them,” Vanderhoof said.

Card holders who do a lot of international travel most likely have at least one chip card in their wallets. Card companies also are starting to mail out chip cards as replacements for expired magnetic-stripe cards.

“I had to replace my American Express card because the magnetic stripe had been de-magnetized and it wasn’t working anymore, and when they sent me my new card it had an EMV chip on it,” Vanderhoof said.

Vanderhoof said the forum is starting to hear that financial institutions are beginning to issue EMV chip cards to select customers, like frequent travelers. “Also, Citibank has implemented a policy where if you call and request a card, they will issue you an EMV-capable card,” he said.