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Renewed Push for Chip-Based Credit Cards

Renewed Push for Chip-Based Credit Cards
By Bree Fowler

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Card processing companies say a move away from the black magnetic strips on the backs of credit cards would eliminate a substantial amount of U.S. credit card fraud, and that it's time to offer U.S. consumers the greater protections microchips provide by joining Canada, Mexico and most of Western Europe in using the advanced tech.
 


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Even so, the protections chips provide only go so far, according to opponents who note that chips don't prevent fraud in online transactions, where consumers often enter credit card numbers into online forms. Some opponents also point to other technologies, such as point-to-point encryption, as better long-term solutions.

Ken Stasiak, founder and CEO of SecureState, a Cleveland-based information security firm that investigates data breaches, says that while chips would be a big security improvement, they wouldn't have stopped the hackers from breaching Target's computer systems where they also stole the personal information, including names and addresses, of as many as 70 million people, putting them at risk of identity theft.

"Chip and pin is just another security component," Stasiak says. "What matters is how companies like Target use consumer information, how they protect it."

Banks generally pick up the tab for credit card-related losses, but companies such as Visa and MasterCard stand to lose too, if data breaches continue to occur with increasing frequency. After all, if consumers don't feel safe using cards, they may choose other ways to pay for purchases.

"It's not just about fraud and losses, it's about the trust involved in electronic payments that's destroyed," says Ellen Ritchey, Visa's chief enterprise risk officer.

In March, Visa and MasterCard announced plans to bring together banks, credit unions, retailers, makers of card processing equipment and industry trade groups in a group that aims to strengthen the U.S. payment system for credit and debit cards. The initial focus of the new group will be on banks' adoption of chip cards.

That comes ahead of a liability shift set to occur in October 2015, when the costs resulting from the theft of debit and credit card numbers will largely fall to the party involved with the least advanced -- and most vulnerable -- technology. For example, if a bank has updated to chip technology, but the retailer involved hasn't, the retailer will be liable for the costs.

Stasiak says many of the retailers he works with already have the technology in place. Once the banks start issuing chip cards, the retailers will activate their new systems, he says. (continued...)

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© 2014 Associated Press under contract with NewsEdge. All rights reserved.
 

Tell Us What You Think
Comment:

Name:

Bill Pratt:

Posted: 2014-06-04 @ 2:38pm PT
The change-over costs of broad based retail use makes leaving the
status quo alone by most retailers. They prefer to just let customers
pay for the losses by interest rates and service fees.
This is factual and admitted by my bank's personnel.

CreditCardXPO.com:

Posted: 2014-06-04 @ 7:21am PT
Lots of countries, even developing ones, have been using this chip based technology for years to prevent fraud. It's about time we get aboard.

GoForChip:

Posted: 2014-05-29 @ 7:21pm PT
Credit card companies should follow Microsoft's example with Windows XP and pull the plug on the legacy magnetic strip.



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