Implementing Chip and PIN Technology For Credit Cards To Protect Against Fraud In The US Thumbnail

Though chip, or EMV, technology for credit cards has been around since the 1990s, the United States has continued to rely on the traditional magnetic strip on the back of cards along with a signature for point of sale (POS) transactions. Some companies have “upgraded” their cards to include a chip but still require a signature, as opposed to a PIN, to complete the transaction. If you are a frequent traveler abroad, this technology isn’t as useful as many foreign countries employ a chip and PIN system to verify payments, which effectively renders a credit or debit card useless in certain places. However, from a security standpoint chip and PIN technology thwarts fraud better than the traditional swipe-and-sign method. 

How is Chip and PIN Technology Different?

We’re all familiar with how credit cards traditionally work. There’s a magnetic strip on the back or an embedded chip that holds your information. You swipe the card and then sign to seal the transaction. Chip and PIN cards achieve the same effect in a different manner. The scanner reads the chip, but instead of signing for the transaction, you supply an authorized PIN to complete it. The PIN effectively replaces the signature portion of the transaction.

Why has Chip and PIN Technology Lagged Behind in the United States?

As with any technological change, there is a cost involved. In this case, chip cards are more expensive to produce, and retailers have to upgrade their scanners to accommodate reading chip and PIN cards. Also, the prevalence of fraud was not as much of a concern in years past for the United States as it was in many European communities. However, with recent breaches of consumer data from U.S. retailers like Target and several well-known lodging facilities, fraudulent activities are now more of a reason to consider safer credit card technologies.

Reasons to Like the Chip and PIN System

Convenience is probably the first reason most consumers will like the change. Having a card with chip and PIN capability will allow you to use it anyplace at home or abroad. No more being stymied when you get to the railroad kiosk in your favorite European city and discover that you can’t get on the train because you don’t have the right type of card. American credit card holders will be in sync with the rest of the world and will have a much more enjoyable retail and travel experience.

An equally important consideration of this technology is that it significantly reduces fraud and enhances liability protection. Information on the chip is encrypted so that each time the user makes a transaction, that information is scrambled in a different way to prevent hackers and thieves from accessing your financial data as easily. These cards also require a two-factor authorization. In order to make a purchase, you must have the actual card in your possession as well as know the PIN. As a result, chip and PIN cards are more invulnerable to counterfeiting.

When Can I Expect for a Changeover to Chip and PIN Cards in the United States?

While some U.S. retailers have already made the change to accommodate the chip and PIN system many more are still not able to accept chip and PIN cards. In addition, the majority of card issuers may have upgraded to embedding a chip in their cards, but they still only accept signatures as opposed to an authorized PIN for confirmation.

However, the trend is changing. With more chip and PIN cards on the horizon, retailers and other card issuers won’t be far behind in making the appropriate upgrades to their equipment and credit cards. As a matter of fact, by October 2015 the industry as a whole will need to make the switch if banks and retailers wish to avoid ramifications of new fraud liability rules that will be implemented by card networks.

How Will I Be Able to Use My New Chip and PIN Card?

The coolest thing about the new chip and PIN cards is that you probably won’t notice much of a change when using them at U.S. retailers. New cards at home will most likely function as hybrid cards, with the signature method as the default for verification and PIN method as the alternative. Carrying out online transactions will remain the same by providing the security code number on the back of the card for verification. If you travel, however, expect that transactions will be much more convenient. How nice to know we can now enjoy the same great rewards, miles, rates and points as always from our favorite cards while benefiting from enhanced security measures and ease of use.