Credit card switch to chips moves slowly

Charisse Jones | USA TODAY

The push to boost credit card security by switching to those with a microchip is off to a slow start, according to two surveys released Thursday.

As of January, 31% of cardholders had the microchip-enabled technology that would make fraud more difficult, according to CreditCards.com.

That falls well short of the one in two credit or debit cards the nation's biggest card issuers said should have a chip by the end of this year. Matt Schulz, senior industry analyst with CreditCards.com, says businesses are taking their time setting up terminals that can accept the new technology, despite a deadline in October that would make retailers liable for any fraudulent transactions made with a chip card that they were unable to process.

"The deadline is rapidly approaching, and progress has been slow,'' Schulz says. "Most cardholders don't have a chip card yet, and if they did, they'd probably have trouble finding a place to use it.''

Schulz says, "The slow movement isn't shocking. ... Given the costs, the sheer volume of cards that need to be replaced and the number of different parties involved, it stands to reason that this process might not always progress as smoothly or quickly as hoped.''

Chip, or "EMV,'' cards are more secure than those with only a magnetic stripe because they are harder to counterfeit. They generate a unique code for every transaction, preventing it from being used for future, fraudulent purchases.

"It's akin to stealing an expired password,'' Schulz says.

The CreditCards.com surveys found that the wealthy were most likely to have the new technology. Among those with at least $100,000 in investable assets, 49% had the chip cards. Young people and men were also more likely to have one of the new crop of cards: 36% of men have the technology compared with 27% of women, and 43% of millennials have a chip card compared with 21% of the elderly.

The electronic payment industry has pushed for adoption of the chip technology for several years, but there was new urgency in the wake of high-profile data breaches at businesses such as Target that affected tens of millions of customers.

Last year, the U.S. industry's biggest players formed a task force to focus on improving security, and nine of the biggest card issuers, including Chase and Bank of America, forecast that they would issue more than 575 million chip-equipped credit and debit cards by the end of this year.

The task force estimates that by the end of 2015, at least 47% of businesses' payment terminals will be able to accept the new cards.

Stephanie Ericksen, vice president of risk products for Visa, says she wasn't surprised by the CreditCards.com findings and notes that chip adoption in the USA matches the pace seen in Europe and other parts of the world where the technology has been used for nearly two decades.

"That's very much on par with what we've seen in other markets,'' she says. "We're moving very steadily, and the momentum has been very positive.''

The majority of new cards in the USA have been issued to international travelers, Ericksen says. Banks and other issuers tend to send the chip cards out after old cards have expired or to those customers who call and request them.

It will probably take four to five years for 90% of the marketplace to have the new cards in hand. The pace is speeding up. By the end of December 2014, Visa had more than 48 million chip cards in the U.S. market, up from 28.6 million at the end of September. "So we're seeing a very steep increase in the number of cards being issued on a quarterly basis,'' Ericksen says.