EMV technology relies on the chip card (or smartcard), which looks just like the standard magnetic stripe cards in use today. The difference is a tiny microprocessor embedded in the card itself. In addition to holding a wealth of encrypted data, this chip runs its own operating system. The result? Far greater security than any magnetic stripe can promise. Chip cards are nearly impossible to counterfeit, even after years of widespread use in Europe and abroad.

Chip cards are used widely in Europe, most of Asia, most of the Middle East, Canada, Mexico, Brazil, Chile and most of Africa. Travelers to EMV zones may encounter problems trying to use cards with magnetic stripes. For frequent travelers especially, the conversion to EMV technology will be a welcome development.

Visa and MasterCard Give a Push

And indeed, it's only a matter of time before the U.S. becomes EMV-enabled. Both Visa and MasterCard are planning incentives for issuers and merchant acquirers to make the switch:

• As of October 2012, merchants are exempt from PCI reporting for Visa if they process 75% of their Visa transactions on EMV-enabled terminals.
• In April 2013, merchant acquirer processors and sub-processors must certify support for and accept EMV chip cards. Also, ATM acquirers will assume counterfeit fraud related liability if a non-U.S.-issued EMV MasterCard is used at an ATM that is not EMV-enabled.
• October 2015 is the target date for Visa, MasterCard, American Express and Discover's liability shift for counterfeit POS fraud. Liability will be assessed to the party that did not enable the chip-to-chip transaction. In the case of issuers, this applies if your cards are not EMV chip enabled.

Why Wait?

As it stands, adopting chip card technology seems inevitable – and, in fact, not without significant benefits for card issuers. If chip cards are the future, why not ride the first wave right now?

For the vast majority of credit unions, there isn't much percentage in doing so. With a few exceptions (for instance, credit unions with a large number of members who travel or live abroad), most credit unions are not facing widespread consumer demand for EMV. American consumers are not up in arms: Most aren't even aware of what EMV is.

If you did issue EMV-enabled cards today, few cardholders in the U.S. would see a benefit. Why? EMV-enabled terminals are still practically nonexistent in this country. Establishing standard protocols for EMV will be complicated, requiring not only the wholesale turnover of cards, equipment and systems, but also the hammering out of network issues. This is going to be a long, gradual process.

            As EMV technology rolls out in the States, demand and utility will rise while costs will almost certainly drop. Experience will help vendors at all levels of the conversion gain efficiency. That should mean lower pricing and fewer potential pitfalls.

Michelle Thornton is a senior product manager at CO-OP Financial Services in Rancho Cucamonga, Calif.