California kills bill to require that retailers use EMV smartcards

State Senate misses voting deadline on bill to set deadlines for adoption of microchip-based credit and debit cards

The California State Senate has killed a bill that would have required California retailers to implement the Europay MasterCard Visa (EMV) smartcard standard that's seen as far safer than magnetic stripe technology used today.

The legislation (S.B. 1351), introduced by State Senator Jerry Hill (D-Calif.), would have given retailers until April 1, 2016 to put in place payment systems capable of supporting EMV debit and credit card transactions. Gas station owners would have had until October 2017 to install similar systems on gas dispensing pumps.

The California Senate Banking and Financial Institutions Committee last week voted 5-2 to pass the bill to the full senate for consideration. However, the full Senate missed the voting deadline of May 30, ending its chances of passage until a new legislative session begins, said a spokesman for Hill.

EMV credit and debit cards use a microchip instead of a magnetic stripe to hold the data that is required to process a transaction. Often, such cards also require users to enter a personal identification number (PIN) when making paying for something at a point of sale system.

Experts consider Chip and PIN cards to be substantially safer than magnetic stripe cards because the technology doesn't allow for a cloned card to make a fraudulent purchase at a point of sale system. EMV smartcards are used widely in Europe and elsewhere but adoption has been slow to come to the United States.

The recent massive data breach at Target, however, has galvanized ongoing efforts by Visa, MasterCard and others to move the U.S. payment industry to the EMV standard. Under the current timetable set by the credit card companies, U.S. retailers are required to support EMV by October 2015 or face increased liability exposure in the event of a data breach.

Consequently many groups viewed the California bill as an unnecessary measure considering the payment car industry's ongoing efforts to migrate to the technology anyway.

The San Francisco Chamber of Commerce, one of about 20 groups to oppose the bill warned that it would needlessly tie businesses to one method of preventing hacker attacks while stifling efforts to find other new ways of countering fraud.

"Additionally, it sets back a more comprehensive national plan for issuing, accepting, and processing chip-imbedded credit and debit cards by creating a 'California only' technology mandate," the chamber noted in a letter to chair of the California Senate Banking and Financial Institutions committee.

The California Bankers Association also opposed the bill, arguing that it was an attempt to regulate interstate commerce by interjecting the state into a contract in which it is not a party.

The contract to issue a credit or debit card is between the financial institution and the payment card network, the CBA said in opposing the measure. "In many instances these corporations are not incorporated in California and they agree to the contract terms outside of California."

Jim Huguelet, an independent retail security consultant said the bill is a reminder of the attention that lawmakers are paying to information security following the Target breach.

"This demonstrates that politicians are now very attuned to the issue of payment security and appear anxious to act. After all, it's an issue that carries virtually no political risk to support," he said.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan or subscribe to Jaikumar's RSS feed. His e-mail address is

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