Northwest banks say 2014 may be the year consumers start to see a new generation of credit cards that are less prone to fraud.
The cards are already in use in Canada, Mexico, and countries in Europe and Asia. Experts say they could have protected consumer data in the recent security breach at Target stores.
They're known as EMV cards, chip and PIN cards, or smart cards. A small, circuit board-like square is embedded on the face of the debit or credit card. Unlike the decades-old magnetic stripe technology, this one is very difficult for fraudsters to replicate. And as some frustrated travelers have learned, smart cards now are the only kind accepted in some parts of Europe.
The U.S. has been slower to change, in part because of the expense of converting such a huge market.
“It's kind of been the chicken and the egg thing," says Tammy Fleiger, vice president of operations at the Spokane Teachers Credit Union in eastern Washington. "You know it doesn't make sense for us to upgrade our cards until merchants can accept it and merchants don't want to upgrade their terminals until they have the card.”
But Fleiger says the credit union will start issuing the chip cards in 2014. A spokeswoman for Seattle-based Washington Federal says it is also ready to issue cards as soon as standards for the U.S. market are finalized.
Incidents like the one at Target and a similar security breach at a chain of Northwest grocery stores are highlighting the vulnerability of magnetic stripe data.
Experts say the U.S. will become a bigger target for this kind of crime as becomes one of the last countries to still use the old technology.
Major credit card companies are pushing merchants and banks to make the switch by October 2015.
That's when Visa, MasterCard, American Express and Discover will make entities that haven't converted liable for any fraudulent charges.
The chip technology is already widely used in the U.S. in security badges and passports. Randy Vanderhoof, director of the EMV Migration Forum, says the chip is actually a microprocessor that generates a unique, one-time security code every time you make a purchase. That code prevents thieves from reusing the data.
Vanderhoof says some big box stores, like Lowes, Home Depot and Best Buy, already have the machines that take the chip cards, the software just isn’t activated yet.
Many banks will likely have customers sign a sales receipt with their purchase, just as they do now. Consumers in other countries are asked to enter a PIN assigned to their chip card, rather than sign their name.
Vanderhoof says around 15 million smart cards have already been issued in the U.S., mainly to international travelers. But that represents less than 2 percent of the 1.2 billion credit cards in the U.S.