American Credit Cards Fail the Smart Test

American credit cards are sadly lacking when they come to Europe and indeed visit other countries that use smart card technology. The important missing element in American cards is smart card technology.

Smart cards include an embedded microprocessor that effectively replaces the function of the magnetic strip, although this is still in place. Smart card technology has been introduced to prevent fraud in over 22 countries including most of Europe, Brazil, Mexico and Japan and more countries are adopting the technology as time progresses. It is anticipated that the next two years will see China, India and most of Latin America embrace this new, high security feature.

The embedded microprocessor makes it possible to store large amounts of data on the card rather than rely on a central database. Banks, police authorities and governments like these new cards as they are more difficult to clone and therefore reduce the incidence of fraud.

Old style magnetic strip based cards are still suitable for most shops and restaurants as these match the terminals that are are in common use in these situations. However, there are an increasing number of automated terminals, at ticket kiosks and gas pumps, that require the use of a new smart card. Americans, with their old fashioned cards, would be unable to use these facilities.

The American banks are falling behind the rest of the world in their adoption of this new fraud prevention technology. They say that card fraud has not been as big an issue in the United States as it is in other countries.

Another reason for the delay in adoption is cost. The estimated cost of introduction has been around $5.5 billion to introduce the new technology and this is mainly due to the need for replacement terminals.

So it looks like American tourists in Europe and elsewhere will need to make certain they have cash in their pockets rather than rely on their credit cards.

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