If you live in the US, you probably heard about the 100m credit and debit card numbers that were stolen from Target's databases recently. (Target initially stated 40m cards were at risk and then revised the figure up).

While Target tries to limit the damage (they recently sent out an email offering free credit monitoring), the bigger question people are rightly asking is why is the US a decade behind Europe on issuing safer "chip and pin" credit and debit cards? How did we let it get this bad?

I remember arriving in the UK for graduate school in 2004 and being issued credit and debit cards after opening a British bank account. My American colleagues and I were fascinated by these pieces of plastic. They were black and red – we called them "Darth Maul cards" after the Star Wars character – and they had microchips embedded in them, something few of us had ever seen before. It was relatively new technology at the time, used to protect against fraud. It's now in place across Europe (and beyond) and has greatly reduced data theft (pdf).

Yet here we are in 2014 and America, a supposed leader in all things financial, has yet to implement this technology (more commonly referred to on this side of the pond as EMV or "smart cards", which only reinforces that the US is still in the "dumb card" era). Some question whether chip and pin would have stopped the Target case entirely, but it sure would have made using the stolen data a lot harder.

Things are starting to change – at least for high-end Americans. A number of banks are quietly rolling out smart cards. Citi and Chase, for example, offer several premier credit cards with chip and pin, but only for certain accounts. Curiously, HSBC, one of the UK's leading banks that has issued chip and pin cards in Europe for years, does not give them out yet to American customers as "standard practice", according to a spokesman.

So what's keeping the US in the "dumb card" era?

1. Scale

Sometimes size isn't a plus. The US has over 10m credit card terminals and 1.2bn cards, according to Smart Card Alliance, an industry group that tries to educate and push for the widespread adoption of this technology in the US. The Alliance estimates that less than 2% of Americans have smart cards. It's difficult to get such a large market to adopt. As the Wall Street Journal reported last week, Target actually tried to roll out smart cards from 2001-04, but the rest of the market didn't follow.

2. Who pays for the updates?

The credit card market in the US is complex (pdf). You have retailers, big banks and then card associations like Visa and Mastercard. So you have to get three sectors of the market to work together to implement any new technology. US retailers and credit card companies have been at war for years over who pays what transaction fees. Now they're trying to sort out who will pay for the estimated $8bn costs (pdf) for chip and pin technology.

3. The US has low fraud rates

America has strong legal protections for people whose credit cards numbers are stolen and historically low fraud rates compared to the rest of the world, so there was a "what's the problem?" mentality here. Randy Vanderhoof, executive director of the Smart Card Alliance also says, "There is not the equivalent of the UK Card Association in the US to set policy and require all stakeholders to act. It has been a challenge to get everyone to agree on much of anything when it comes to payments and who pays the cost and where the fraud savings will be realized."

4. Phone technology

Since the smartphone revolution, people have dreamed of a world where transactions are simply done via cellphone without the need for any plastic at all. There was hope the US could bypass the intermediate chip and pin step. While many companies are innovating in this area, this technology has also struggled to take hold in the US.

Wake up call

The Target data breach has been another wake up call for US regulators and consumers. Behind the scenes, there's some movement towards the smartcard system. By 2015, credit card companies intend to shift the legal liability for fraud onto retailers who haven't upgraded to EMV systems. It's a scary scenario for merchants, as Target illustrates.

Of course, this is about more than just card theft. Americans traveling abroad are increasingly left behind when they go to pay. I was in Eastern Europe earlier last year at a small hotel that couldn't read my credit card. The manager just looked at me like I was trying to pay with ancient coins. Another friend experienced something similar at stores in Paris. Smaller European retailers no longer want to deal with the "swipe cards", which require a different machine than chip and pin ones.

This is to say nothing of the continued reliance Americans also have on checks. On this side of the pond, we've been slow to adopt direct deposit and wire transfers.

I actually got one of the Target emails notifying people that their details were likely stolen. It was jarring. But it might turn out to be the kick in the pants the US desperately needs to get into 21st Century consumer banking. I'm still waiting for my American cards to look remotely like my British ones.