New York, NY: May 18, 2010:  A smart credit card features an embedded microprocessor instead of a magnetic stripe to store cardholder data and all of the other information needed to use the card for a transaction.   This technology, while commonplace in Europe, has yet to be adopted in the U.S. due to objections over system and roll-out expenses.

Yet one financial institution in the U.S. is taking the first step forward.  Last week, the United Nations Federal Credit Union (UNFCU) became the first financial institution in the U.S. to unveil plans to issue credit cards that comply with the Europay MasterCard Visa (EMV) smartcard standard. The credit union's new Platinum Visa EMV cards will be issued to about 5,000 of its most high-value customers and can be used anywhere EMV cards are accepted

Cards based on the EMV standard use a microprocessor to retain account and identify information rather than a magnetic strip—the current standard for U.S. issued cards.

Many financial institutions that issue EMV Chip cards also require cardholders to enter a Personal Identification Number (PIN) as an added security measure when using the card.

Chip-and-PIN credit cards are considered to be significantly safer than cards with magnetic stripes, which has led to the widespread adoption of EMV smartcards across Europe and in several other countries.EMV Co, an organization run by MasterCard, Visa, American Express and others to administer the EMV standard, estimates that close to a billion EMV cards were in use worldwide in 2009.

To accept Chip-and-PIN technologies, merchants will be required to either upgrade or replace all of their existing payment terminals. Banks, too, could end up spending significant money to rollout the cards to customers.

The reluctance to adopt the technology, however, places U.S.travelers abroad at a disadvantage. U.S. card holders find it more difficult to use their magnetic stripe cards in countries that have standardized on EMV technology. That's especially true in situations involving unmanned payment terminals such as ticket kiosks at railway stations or payment stations at parking garages.

Souce: ComputerWord, UNFCU