Credit cards are all about convenience. Part of the reason for the move to contactless cards is decreasing the “transaction friction”. Studies have shown that people spend money more casually the easier it is to approve the transaction. So why do I feel like a second-class citizen when using my credit card in Europe?
As this fascinating documentary shows, credit cards started as an elite accessory for only the richest people. This is why the banks were able to charge such high interest rates — they restricted their clientele to those who could afford it. As various states (especially Delaware and North Dakota) relaxed the rules, banks moved their card operations there and began offering credit cards to more people. Today, credit cards are a common part of everyday life.
When traveling in Europe, a credit card is very useful. You get an automatic currency exchange with no need to carry around unfamiliar coins or make repeated trips to the bank if you underestimate how much you’ll spend. But if you carry a US credit card, you are shunned.
At nearly every restaurant, I’ve had the pleasure of instructing the waiter how to swipe the magstripe card. Most of them are unfamiliar with the proper orientation of the card or the correct speed. Ending every meal with a delay and apology is no fun.
Want to rent a bicycle from the Velib automatic dispensers all over France? Sorry, you can’t.
Want to take a local train in Geneva but don’t have coins? Sorry, your card won’t work either. (This caused me to miss a train with a connection that only happens every 90 minutes.)
Want to ride the TGV high-speed rail system and didn’t buy a ticket in advance? Sorry, you have to wait in the long line for a live agent. Your card won’t work in the kiosks.
The reason for all this is that European smart cards contain a chip that supports the EMV payment standard. While the US system is stuck in the 1960’s with magstripe and online verification, smart cards provide quick and cryptographically secure offline transactions. To be fair, changing out all the US terminals to support EMV would be an expensive undertaking. Also, there are estimates that smart cards cost the banks around $1.25 each while a mag card is about $0.25. I’ve heard a rumor that most of the cost of a mag card is to license the hologram. Here are two articles that describe why the switch to smart cards is taking so long.
The sad thing is, I’ve worked with smart cards for ten years. My previous company, Cryptography Research, licenses side-channel countermeasures to all the major smart card manufacturers. Experiencing these inconveniences while exhibiting at the biggest smart card trade show is probably the height of irony.
What if the credit card companies offered US citizens an upgrade option to the “International Traveler” card? I’d be happy to pay a one-time fee of $20 for a smart card option. Even though it would currently be useless in the US, at least it would save me some hassle overseas and make my card less vulnerable to skimming attacks in some countries. At a time of declining fees and increased regulation, any credit card company want the additional revenue?