The U.S. financial services industry is undergoing a revolutionary shift -the most significant upgrade to consumer financial security in the last half-century. And if you're like most consumers, you have already received at least one of these new upgrades in the mail. On October 1st of 2015, smart "chip" cards - sometimes called EMV cards -- became the new standard for payments security in the United States. Having a chip means that a customer's payment method includes a tiny but powerful microprocessor, working around the clock to store and secure consumer data. The age of the magnetic stripe card is over.
In six months since the migration began, nearly 600 million new chip cards - almost half the cards in circulation - have already reached consumers. Nearly three-quarters of Americans report they already have at least one chip card. And more than 1.2 million merchant locations in the U.S. have upgraded to chip readers. Three quarters of those merchants are small businesses. And this is without any mandate - legal or business - to upgrade. It's true - America is winning at EMV adoption - to put it in perspective, it took at least five years for the Eurozone and most Latin American countries to achieve just 50% market penetration of chip transactions.
Based on these early adoption numbers, we can now project that more than 90% of cards will be upgraded to chips by 2017. That's sounds pretty fast - how does it compare to other significant technology overhauls? The transition from analog to digital television in the U.S. started in 2009, and the last television stations didn't switch to digital until 2015 - six years later. It took the mobile phone industry thirteen years to reach 25% adoption. Even the upgrade from cell phones to smartphones took 5 years to reach 25% of the population. The PC took 16 years to get to 25% penetration. And the commercial use restriction on the Internet was lifted 21 years ago in 1995, but online commerce is still only about 10% of overall retail.
With all these new cards, commerce is significantly more secure. The transition to chip cards makes paying electronically safer than ever, because chip cards generate a unique security code with each transaction, unlike magnetic stripe cards that use the same code every time you swipe. That makes it impossible for criminals to produce counterfeit cards - which are responsible for some two-thirds of all in-store card fraud in the U.S. today. With the chip card upgrade, we knock out the single largest source of fraud.
Safety is just the start, though. Chip cards open up a whole new universe of possibilities for mobile payments. Most EMV terminals are also mobile payments-ready, outfitted with NFC (near field communication) capabilities. NFC is the wireless form of the EMV chip cards, meaning the same safe and secure infrastructure can support both chip cards and mobile payments. Adding the mobile-pay option is great for consumers because it's easy, convenient, safe, reliable, and rewarding. "Rewarding" not just in the sense that you feel hip for using the latest technology, but truly REWARDING - in that retailers are offering exciting, personalized discounts and custom-tailored shopping experiences to mobile payments users.
The US financial system is complex and a change of this magnitude takes time. But, as chip cards become ubiquitous, they are keeping consumer data better protected, advancing new technologies, and helping merchants fight fraud. So take out your new chip card for a spin at your favorite local merchant - and enjoy security and convenience of electronic payments.