Saturday, March 11, 2006

Will Chip and PIN come to the US?

Chicago Tribune : Citibank uncovers debit card fraud

Europe has already deployed chip and pin to address this issue. Deploying chip and pin in the US is much harder because of the business relationships. The main cost of chip and pin falls on the issuing banks. The cost of deploying new readers and so on falls on the merchants.

In Europe the banks are less sensistive to the allocation of costs and benefits because they all act as issuing banks and merchant acquirers. In the US there are many card issuers, nor all of which are even banks. There are fewer merchant acquirers. This means that any change to the system requires co-operation between the two sides and possibly a renegotiation of the business relationships. This is turn is difficult because antitrust prevents the type of coordination that is necessary to effect change.

1 comment:

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