This goes from the transaction terminal to the bank's server room.
Europe has had chip cards for over 20 years. In the US, it was very recently implemented; only in the past year.
It wasn't that the US banks were occupying some "sweet spot" of retail transaction risk/reward; they simply didn't want to shell out the extra bucks to send people cards with chips in them. Neither merchant nor bank wanted to pay for chip-reading terminals. So, nobody budged until just the past year.
I don't know whether it was legislation, or perhaps the growing cost of credit card fraud (i.e. card skimmers, etc), but for whatever reason, it certainly wasn't a "sweet spot". We've had chip technology for 20+ years, they just didn't want to pay for it.
But ultimately I think its the people themselves that demand more security from their banks. E.g. Bank one introduces chip based cards and more people choose that bank because they want more security. Then gradually some atms start to be "chip only", and banks start to see the chipless ones get all the skimmers and accelerate their replacement to lower costs which forces business to atart getting more pos terminals with chips to meet the demand of people with cards that have mag strip disabled.
Having more security seems to be what everybody wants and benefits from, its just that europe has smaller players which accelerates market forces in that direction, and meybe because european consumers just want more security in general.
Here in the U.S. the next step is usually asking for the social security number. I called VISA/Citi to re-activate my card after traveling and they asked for the associated phone number with my account. Neither of these are especially secure, in my opinion.
Agreed. It still amazes me how prevalent credit card fraud is. Certainly that's preventable - if they want it to be. The problem is, the banks don't bear that cost, the consumer does. Even if the bank factors the loss into the cost of doing business, that still gets passed on to the consumer.
It is merchants (stores, internet sites) that bear the cost of fraud.
Merchants don't bear the cost, the consumer does. The merchant might not hand me a bill but that cost is embedded somewhere in the price.
The bottomline is the consumer pays. No matter how you cut it, the consumer always pays.
I think it's no coincidence that the current state of affairs sits right at the sweet spot of these intersecting interests. And the problem is that the model requires an element of risk which is quite hard to control. Every now and then it flares up and becomes much bigger than they want. So we have incidents like this where the insecurities inherent in the system get exploited on a massive scale and the risk threatens to cross from profitable to massively unprofitable.