Last Friday, President Obama signed an executive orderthat requires the federal government to use chip and PIN technology on all ofits payment cards, and to upgrade the point of sale terminals in places likenational parks to accept chip and pin cards.

The initial wave of reissuance will be focused on prepaidcards used to distribute Social Security benefits. As previously reportedby PaymentJournal, Mercator Advisory Group estimates thatthere are about 3 million of these cards in circulation, which, depending onthe cost per card, could mean a cost of anywhere from $15 to $20 million toreplace. An additional 3.3 million purchasing, travel, and fleet creditcards have also been issued as part of the federal governments GSA Smart Payprogram, which brings the total cost of reissuance closer to $30 billion.

And since many state governments followfederal-level best practices when implementing their credit card programs, itis likely that many states will also move to chip and PIN technology. Mercatorestimates that another 2 million purchasing, travel, and fleet cards have beenissued as part of state-level procurement initiatives.

Ambiguous language in the executive order (particularlyregarding if the chip will replace or operate in addition to the traditionalmagnetic stripe) suggests the federal government hasn’t thought through all ofthe issues related to this change. We can presume then, that it has also notyet come to the realization many banks and merchants did long ago – that EMV isexpensive. The industry should be prepared to educate the government inorder to avoid getting caught up in deadlines for changes that are moreaggressive than what it had planned. The order could very well end up beingrefined before implementation.

Overview by Michael Misasi, Analyst, Credit Advisory Service for Mercator Advisory Group

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