Why Hasn’t the U.S. Adopted EMV?

EMV chip technology is not new, but why hasn’t the U.S. gotten on board?

With advanced security, endless technology benefits and success in many other markets, it can be confusing as to why Americans are not already seeing widespread use of EMV technology. After the 2013 breach of Target credit cards during the holiday shopping season, business leaders, including Target’s CFO, are now calling for acceleration adoption of the technology.

So why isn’t this more widespread? This infographic breaks down the benefits of the card and some potential  reasons why the payment technology hasn’t been widely adopted in the US.

What do you think about EMV? Will it still be Europe-only?

 

Smart Cards
Source: ComputerScienceDegreeHub.com

U.S. Banks: Too Small To Succeed?

As the clock ticks down to the ‘fiscal cliff,’ it’s been interesting to see the response from the banking community. For example, it was reported that at the urging of CEO James Gorman, more than 15,000  Morgan Stanley employees, nearly a third of the company’s workforce, had just sent letters to Congress asking for a “balanced” approach to the eventual deal (if there is one).

Of course, when it comes to the government, the industry has more on its mind than just a looming rise in tax rates and drop in spending. The separate-but-perhaps-related issues were on full display just a day earlier when the same CEO spoke at an industry conference—as comments will surely be of great interest to those same lawmakers currently huddled in negotiations.

“The economies of regional banks don’t add up,” Gorman noted. “There will be more consolidation.” While many bemoan the ‘too big to fail’ shape of the industry as it now exists, the U.S. banking industry actually needs larger financial services institutions with more assets and greater reach. Some recent deals prove his point. In November alone, Jeffries Group was acquired by its largest shareholder, Leucadia National Corp (LUK.N), specifically to assure investors of its staying power, and Stifel Financial acquired boutique investment bank KBW.

Despite its own impressive asset base, Morgan Stanley itself is far from immune to these pressures. The investment bank’s credit rating was downgraded earlier this year, in part because of concerns that it can’t compete with the likes of JPMorgan Chase in specific businesses. And at the same conference, Gorman acknowledged that Morgan Stanley is getting out of some markets, though he maintains that the company is not looking for a buyer.

This premise clearly runs counter to conventional wisdom, which holds that too many banks are already too big to fail. This was at the root of numerous debates during the recent election cycle, with continuing controversy over the massive bank bailouts initiated during the Bush administration. The promise, of course, was ‘never again.’ But when some institutions inevitably hit hard times and by dint of size alone threaten to jeopardize the entire financial system with an imminent collapse, what then?

It’s tempting to look overseas for pointers. Canada serves as prime example—it has a high degree of consolidation, yet was largely unaffected by the financial meltdown. By contrast, France remains a source of worry. A few banks there, also very consolidated, carry a huge amount of debt, and that may prove to be a problem both short- and long-term. The U.K. banking system has related concerns: The Bank of England just sent out a warning British banks need greater capitalization to defend against a euro zone fallout. In other words, they need to be bigger.

Of course, we’re not going to get the answers from any single source, especially one that’s overseas. The U.S. system is simply much larger than, and more competitive than, any other to make a direct comparison. It’s also subject to both regulatory compliance and free-market pressures that are essentially unique and always evolving.

The current angst over the fiscal cliff will eventually fade. Either a deal will get done with neither side being too happy about it, or a deal won’t get done and the spending cuts and automatic tax hikes will kick in, and Congress will be forced to develop new mandates. They may even find a way to kick the can down the road and put in temporary measures that don’t solve anything.

Whatever happens, there’s no question that we need a long-term outlook—the current agonizing over the Bush tax cuts and Obama stimulus packages serve to shine a spotlight on the state of the economy as a whole, and the banking industry’s role in it. Those writing in to Congress to ask for a ‘balanced’ approach are surely right. However, what that approach might mean for us—how big and how regulated we should be—remains a question in search of an answer.