PayPal has released a new mobile card reader in the U.K., which wouldn’t seem like big news — we already have a bunch of those here in the U.S., including PayPal’s. But there’s a difference: the overseas version crushes anything available stateside.
This superiority isn’t because PayPal has come up with some big breakthrough. It’s because the underlying payment technology on which its based, called chip-and-PIN, is just better than the old-timey magnetic stripes that still adorn the backs of U.S. credit cards. Compared to Europe, the way Americans pay is stuck in the 1980s.
As shown in the video above, chip-and-PIN works like it sounds: You put your card in the reader; it reads the card’s chip; you enter your PIN. Yes, from the payer’s point of view, debit cards in the U.S. already work this way. But if your debit card is anything like mine, it still has that stripe across the back.
And mag-stripes, to use the industry argot, are child’s play to copy. Thieves can hide “wafer-thin” card skimmers inside ATM or gas pump card slots to steal a card’s data. Of course, you hardly need to go that far. Just steal someone’s credit card, rack up a big tab and scrawl an illegible signature at the bottom of the receipt. How many times has a cashier said, “Hey, that’s not you!”
The chips in chip-and-PIN cards are supposed to be much harder to copy than a mag-stripe. Credit card networks in the U.S. are pushing for the widespread adoption of these so-called EMV chips sometime this decade, and for obvious reason: Cutting down on fraud saves them money.
But if chip-and-PIN is so much better, why don’t we have it here already? Analysts say that when it comes to the slow spread of payment tech in the U.S., we have the free market to thank. Consumers, probably due to a simple lack of awareness, aren’t demanding better payment options. Stores and banks, in the meantime, don’t want to invest in the new hardware they’ll need to take chip-and-PIN if no one has the cards to begin with.
PayPal isn’t the first company to offer mobile chip-and-PIN readers in Europe. But such a device made by a U.S. company at all could be a good sign. If all it takes to accept chip-and-PIN cards is a smartphone and a tiny mobile card reader keypad, the hardware doesn’t seem like such a huge investment for retailers after all. In the U.S. we love innovation. Sometimes we’re just not good at knowing it when we see it.
PayPal's New U.K. Card Reader Exposes Inferior U.S. Tech
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PayPal's New U.K. Card Reader Exposes Inferior U.S. Tech
