Coin — Dead on Arrival?
Sometime last year, I heard this news about Coin, a new concept, a single card that has potential to replace (almost) every card in your obese wallet. Thanks to the new trend of backing, Coin got funding for converting their ideas from their drawing board to shipping boxes, from the very people that will use it.
At heart, Coin is a simple, novel concept. It has an active-passive role. What I mean by that is that the card itself is “active” — meaning it is a powered device, it has circuitry and intelligence built into it. But the role it plays is “passive” — meaning it doesn’t have an identity of its own. It takes the form of whatever real world credit card you want it to be. (This is in sharp contrast with Google Wallet Card — which has a passive-active role).
Unfortunately, I believe Coin’s first version will be short-lived. Earlier when Coin was first opened up for pre-orders, EMV was a non-issue. Even as of announced release date, EMV will be a relatively unheard concept in the US, which is where Coin will initially be supported.
EMV is the next-generation of credit cards, deploying new standards of how we use credit cards in our day-to-day lives, and utilizing a completely new hardware specification, as compared to the current-day credit cards. The description “next-generation” is bit of a misnomer because usage of EMV credit cards are as high as 90% in certain parts of Western Europe, with countries like France adopting EMV almost 2 decades back.
US has stayed away from EMV primarily because it is a large country, with millions of terminals and billions of credit cards (by some source, America averages 8 payment cards per individual). The cost of converting to such a system is just too prohibitive, compared to the write-offs/ bad debts associated with credit card frauds. With the financial institutions facing the huge cost of replacing credit cards and ATMs, and with merchants facing the huge cost of replacing the terminals, EMV was conveniently ignored for a long time. Not anymore.
There is this implementation strategy called Liability Shift. Earlier, it was both the banks and the merchants opposing it. Now the banks have realized they have no choice but to convert, because a large part of the rest of the world have converted — and it presents lot of challenges with their American consumers traveling abroad and foreign consumers using their EMV-enabled cards inside the US. Hence they are shifting the pain of moving to EMV, to the merchants. How?
Starting October 2015, they will implement a Liability Shift, which basically means merchants will be responsible for any credit card fraud resulting from a non-EMV transaction. Put simply, Oct 2015 is the beginning of a transition period to EMV, which may take few months to few years. Going by a few articles I read (sample), 2017 looks to be a plausible deadline.
What does this have to with Coin?
Bottomline, Coin is not EMV compatible. You may think you still have almost 3 years before Coin v1 is rendered useless — but with the increasing adoption, you will resort to EMV-enabled credit cards and start leaving the Coin home sooner than you think. Sure Coin will come up with a v2. Sure it will support EMV. Sure many of us will buy it. With many people buying a new phone every year, a $100 wallet-slimming gadget every 2 years doesn’t seem like much — but if you have not yet “backed” the Coin v1, may be you can wait for another couple of years.