A New Dongle for Chip-and-PIN Cards May Ease EMV Adoption Pains in US

Finally there’s a dongle for the chip and PIN set.

Actually, it’s a bit big to be called a dongle. (Trust us, we know our dongles.)

Milan, Italy-based JUSP has launched a device that plugs into a smartphone’s audio jack and can perform transactions with EMV-compliant or “chip and PIN” cards, which work with an embedded computer chip and PIN number. They’re also known as smart cards.

The device, pictured at left, is quite a bit larger than the magstripe readers US smartphone users are accustomed to. This is due to the more complicated – and more secure – interaction between the card and the device. (But couldn’t the PIN number be entered on the app rather than the device itself? See the Comments below for more on this.)

The reader costs $49, or €39/ £39 — substantially cheaper than rival offerings, the company says — and charges a 2.5% fee per swipe. iZettle and Payleven offer similar devices for about 20% more.

Chip and PIN technology was introduced in Europe in the early 1990s and has led to dramatic reductions in fraud rates. It is commonly used all over the world — except in the US, where magstripes still rule and smart card use is extremely limited.

While data in magstripes – compared to the technology used in cassette tapes by Jason Oxman of the Electronic Transactions Association – may be easily read and reproduced by ATM skimmers used by fraudsters, chip and PIN cards cannot, because the data is secured on an internal computer chip, and further, a one-time code is generated for each transaction in place of the card security code printed on the back (or front, for American Express cards) of magstripe cards.

Smart cards are expected to approach universality in the US in October of 2015, but don’t count on it. (See “metric system.”) No one is clamoring for them. Consumers are largely unaware of them, issuers are not anxious to assume the vastly larger expense of issuing them, and merchants are hardly lining up to buy the expensive new point-of-sale devices to transact with them.

But with the growing shift to tablet at the point of sale, JUSP’s product could substantially reduce the pain for the small but growing number of merchants that are already set up with Square-type card readers.

JUSP needs a US partner to enter this market, the last major market in the world to assume EMV technology, and one of the most important. It’s a good bet they are on Square’s radar.