Chip cards for (some) Americans

It seems that the American plastic cards are getting them in trouble, at least when they travel in Europe. Of course, cards without chips still work perfeectly in restaurants, hotels, and stores. However, things are very different at automated machines. If you are in France and you want to pay for underground parking, for renting a bike, or for a subway trip, your card better have a chip with which to perform an EMV transaction. Otherwise, you may well be out of luck.

There are a few exceptions to that rule. If you are lucky enough to be in a place that accepts American Express, these cards will be accepted even if they don’t have a chip (this is quite natural, since even those issued in Europe have no chip). But in many cases, you may well be really out of luck. Consider the subway example, for instance. In many places, it is becoming common to close all tellers at late hours, only to leave automated machines. And if you can’t get them to work, well, things may get ugly.

Things are only going to get worse, and apparently, some American companies have understood that. According to the NYTimes, Travelex is getting ready to issue prepaid smart cards for its customers in a bout a year from now. That means that, in a while, we should see American tourists with smart cards. And if it works, we are quite likely to start seeing American businessmen with smart cards as well, as corporate cards for international travellers will start having them as well.

Good news for smart cards? Not necessarily. If we consider that only 20% of all Americans have a passport, this also caps the number of Americans with that specific need. Most likely not the killer reason for American banks to switch to smart cards, which are still considered too expensive to manage.

6 Comments

  • This has nothing to do with chip and pin. I have an Electron VISA chip and pin card issued here in France and I cannot use this to pay for parking, for tolls, for velib, for most unattended terminals and sometimes even with attended terminals. See my blog : http://www.finextra.com/community/blogs.aspx

    The reason why some cards (with or without chip) are not usable with unattended terminals is because these unattended terminals do not do online authorization of the card payments.

    Even if you do get a chip and pin, once you use this chip and pin card outside of the country that it’s been issued, an online authorization will still be required especially if said chip and pin card is a debit card.

  • Well, a Visa Electron card is actually designed to require a systematic online authorization. See the Wikipedia entry for it for reference: http://en.wikipedia.org/wiki/Visa_Electron .

    Visa Electron are designed to avoid any overdrawn account, and that seems to be working in your case.

    I am not an expert in EMV transactions, but I know that the decision to go online results from a combination of the terminal requirement and of the card’s requirement. An Electron card always requires to go online, and most likely, unconnected terminals never do.

    If you get a card that does not require to go online unless some kind of threshold has been reached (number of transactions, or cumulated amount), then it should work on most unconnected terminals. And we can sure hope that American issuers that provide EMV cards to their customers traveling abroad will use a risk management policy that does not require systematic online verification.

  • I am a monetic expert. I do know that out-of-country spend require online authorization. Card-not-present transactions also require online authorization.

    Your EMV European issued card when used in the states will require an online authorization.

  • Additionally, in the U.S., deferred debit cards are not common. You either have credit cards or debit or ATM cards.

  • I don’t want to get into an expert war, because I have no claims in monetic. Nevertheless, the NY Times article I was referring to was mentioning chips cards that would be issued especially for Americans traveling abroad, where chip cards are more or less mandatory.

    The one thing I have read in the EMV specs (a long time ago) is how the decision to go online to check a transaction is made: the terminal goes online either because the terminal requests it, or because the card requests it. In the small number of risk policies I have seen the decision to go online for foreign cards comes from the terminal, which doesn’t trust foreign cards. Of course, that doesn’t apply to unconnected terminals, which can’t go online.

    However, terminals can still refuse these cards. Or, these cards (which could be prepaid) could work in an “always-connected” mode.

    If one of these two things happens, it would definitely decrease the interest of these special cards for traveling Americans, because they would basically work only in places where “normal” U.S. cards work.

    And ultimately, this would be bad news for Americans, because it would mean that they will soon have problems in many places around the world.

  • “Nevertheless, the NY Times article I was referring to was mentioning chips cards that would be issued especially for Americans traveling abroad, where chip cards are more or less mandatory”

    ce n’est pas évident que cela va marcher. It is not clear that this is what will make it work.

    Putting a chip in a card whereas the card policy forces an online authorization with an unattended terminal that is not connected, is obviously not the solution.

    I also mentioned in my blog that indeed there are purely mag-stripe signature U.S. issued cards that work with unattended toll (peage) terminals for example. Ergo, putting logic to work – a chip really isn’t necessary to make U.S. magnetric stripe signature based cards work.

    Prepaid cards function very much like an Electron VISA card. Prepaid card issuers can offer something ‘custom-made’ to U.S. cardholders, and this does not necessarily equate to a card with a chip. It’s tempting to discuss how to ‘custom-make’ such prepaid cards but I’m afraid that this is competitive information.

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