April 14, 2011

Wells Fargo Testing EMV Cards To Use Abroad

Wells Fargo & Co. is testing microchip-embedded credit cards with frequent travelers to address complaints of customers who have had trouble using their cards internationally.

According to San Francisco-based Wells Fargo, the program announced today marks the first effort made by a U.S. bank to deploy Visa Inc. credit cards with so-called EMV-chip technology, which has become a standard in Europe and much of the rest of the world.

"It's not an infrequent message from our customers of the acceptance challenges they have when they go overseas," Eric Schindewolf, vice president of product development for Wells Fargo's consumer credit-card unit, said yesterday in a phone interview with Bloomberg. "We want to remain top-of-wallet, wherever our customers are."

Wells Fargo is preparing to notify 15,000 customers it has identified as frequent travelers, including college students and clients of its private bank, that they have been invited to participant in the pilot. 

The U.S. is among the last developed nations whose payment system relies primarily on cards with magnetic stripes and has not yet adopted EMV.  EMVCo manages standards for the technology.

"There's a widespread consensus around the world that it's a more secure" payment technology, Gwenn B©zard, an analyst at Aite Group, a Boston-based research firm, told Bloomberg.
Schindewolf said the EMV chip helps to create a "dynamic cryptogram" that prevents the use of fraudulent or cloned credit-cards.  Wells Fargo's EMV cards will still carry magnetic stripes for use in the U.S.

According to a 2009 study by Aite, about 10 million U.S. consumers experienced credit-card acceptance problems abroad in 2008.

Schindewolf said a common problem facing U.S. consumers it that some merchants abroad are unfamiliar with magnetic-stripe cards and may refuse to accept them. 

Brian Dodge, spokesman for the Retail Industry Leaders Association, said that the Well Fargo program represents a "half-step" in catching up with payment technology ubiquitous in the rest of the developed world.

"The system used in the United States is similar to that used in North Korea," Dodge told Bloomberg. "Any system that reduces fraud is a win for consumers and a win for retailers."


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