Starting January 2016, all credit and debit cards in Costa Rica must be compliant with the smart chip and PIN technology known as EMV, which stands for Electron-MasterCard-Visa, an international initiative to prevent financial fraud at the consumer level.

According to a recent report filed by Krissia Chacon Jimenez of business weekly El Financiero, the Central Bank of Costa Rica has determined that all cards must include the EMV chip in addition to the traditional magnetic stripe.

The Costa Rican Banking Association (Spanish initials: ABC) estimates that more than 90 percent of card issuers in our country have started the process of shifting their products to EMV. According to ABC spokesman Jose Ignacio Cordero, about 80 percent of merchants have already completed the process of installing the new card reading equipment that will allow them to process both EMV and legacy magnetic stripe transactions.

In Europe, the EMV chip and PIN system has been in use for years. This system requires individuals who make payments with their credit and debit cards to input their PIN numbers in lieu of a signature to finalize a purchase of goods or payment for services. The system features a dynamic encryption mode, and the chips are much more difficult to clone than the legacy cards.

The base cost of shifting to these cards in Costa Rica has been estimated at about $4 to $5 per card, versus the current $1 for legacy cards. It will be up to the banks to pass these costs on to their account holders, clients and merchants. Major financial institutions such as Banco Nacional currently charge about $10 per legacy card to savings account holders for the use of their MasterCard, unless they are big spenders who frequently use their cards for purchases and payments.

The EMV systems is also being deployed in the United States; however, the sheer magnitude of that financial system will delay completion of the shift by a few years.