ROBERT SIEGEL, HOST:
American credit and debit cards are getting an upgrade. You may have already gotten one in the mail. They now have a small computer chip in them. This chip has been used in European cards for decades already. They are harder to copy. They reduce fraud. But as Alex Goldmark of our Planet Money podcast found, it can be hard to actually buy something using the chip.
ALEX GOLDMARK, BYLINE: If you're in New York City and you need a haircut, I can recommend a small barbershop about a block from City Hall. It's called Antonella's, and Antonella Nicolae has been cutting the hair of mayors, police commissioners, me and other balding men for more years than she cares to remember. Not much changes here, including the credit card machine.
ANTONELLA NICOLAE: The machine is not converted to the chip because it's very easy to use this way.
GOLDMARK: With the old-fashioned swipe. And criminals with fake cards - they don't tend to use them for haircuts. And she knows most of her customers. So the cost of upgrading her credit card reader, which is somewhere between $100 and $1,000 - not worth it.
NICOLAE: This is very small business, so that will be hard for business.
GOLDMARK: So that explains why some places don't take the chip. But then there's this other situation. A few blocks away, there's the lunch chain Pret A Manger. You walk in with your fancy, new chip credit card, and they have the machine to take it. And there's that spot to dip in the card, but...
All right. Can I dip the card here?
UNIDENTIFIED WOMAN: Swipe, please.
GOLDMARK: Swipe - I can't use the chip.
No chips allowed. Pret told us they are still testing the new machines, and a lot of companies are stuck at this stage. There are millions of stores in America but only a few companies that can test and certify the new readers. There's one more reason that a store might not have adopted the chip yet. When someone buys something using the chip card, it's just slow. I found an expert to ask about this.
OLIVER MANAHAN: My name is Oliver Manahan. I'm formerly the vice president of emerging payments at MasterCard.
GOLDMARK: It was Manahan's job to get America on the chip, and he told me chips aren't that slow.
I don't know. Can - I timed how long it is. Can I just walk you through what it's like?
MANAHAN: Yeah, absolutely.
GOLDMARK: OK, so I'm at the register. I take out my card. I'm dipping my card now.
GOLDMARK: And there - now I get to take it out. That's a long time.
MANAHAN: That's - yeah, and I'm...
GOLDMARK: What's going on there?
MANAHAN: So the card remains in the reader for that duration because it's actually getting communication back from the bank to say, I've authorized this, and now I'm going to let you know that you're communicating with your valid bank. So the security goes up, but to your point, the time goes up as well.
GOLDMARK: The upshot of all this is that currently only 1 in 5 transactions use the chip. That's according to Visa. Manahan says, though, it won't always be slow. Other countries are already using something faster - contactless payments where you pay with your phone or you just tap your card and go. He says the good news is that the new chip-reading machines - they should be ready for that tap-and-go world. Alex Goldmark, NPR News. Transcript provided by NPR, Copyright NPR.