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Battling Credit Card Fraud

What is Chip and PIN technology and How Does it Benefit Card Processing?

While the name may sound quite catchy, it does reference a children’s cartoon or an adventure game. Chip and PIN actually refers to the EMV smart card payment system that is on the rise for use with your credit, debit or ATM card. In fact, this new form of technology has become acceptable nearly overnight in many European countries but has been slow to gain traction in the United States.

American banks have a concern for the cost of incorporating a new payment system and counteracting cyber criminals who are already in hot pursuit of infiltrating it for their gain. However, if you are one of the millions of Target customers who were affected by the credit card breach a few months ago that rattled everyone’s cages in terms of identity theft, the Chip and PIN system may be what restores your faith in credit card security.

How it Works

So, what is Chip and PIN technology and how will it benefit card processing? Well, this new technology does away with the traditional magnetic strip that only requires a signature in exchange for an embedded microchip that is activated by a corresponding personal identification number. This PIN is entered by the consumer on a wireless keypad and the attendant does not have to handle the card. The addition of a PIN required to complete sales transactions versus the old swipe-and-sign method is expected to decrease instances of credit card fraud because it is virtually impossible to close the cards with the chips inside on card readers which has helped criminals become successful in the past. Plus, if the card somehow gets cloned, a thief would still need the four-digit PIN number to complete any type of transaction.

Benefits

This new payment system comes with a host of positive advantages for both cardholders and retailers alike. As mentioned above, cardholders have a greater sense of security for their cards. Point-of-sale transactions can be completed quickly and easily without the card ever leaving the owner’s sight so there is less chance of cloning like with a magnetic stripe card. However, there does exist a greater amount of consumer accountability. Cardholders cannot hold retailers responsible for fraud since they are the only ones who have access to the correct PIN, thereby, decreasing liability on stores. Also, on behalf of retailers, transactions can be completed more rapidly with this process and there is a decreased need for excess receipt paper since signatures are not required.

Overall, this new technology reportedly saved nearly $200 million between 2004 and 2008 in the UK. Both cardholders and retailers can only hope that Americans see the same benefit when this payment system is rolled out in the US in the next several years.

If you would like to learn more about how to protect your financial information, please feel free to contact us.

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