Chip-and-PIN Is Here, but It’s Not a Credit Card Security Cure-All

Chip-and-PIN credit and debit cards have arrived, adding a new layer of security for payment cards. But the technology is not a security panacea, and its full potential still has not been implemented in the U.S.

Even when completely integrated, it will not protect against all payment card fraud, especially when it comes to online fraud — which means that some basic precautions will still be in order for card users this holiday season.

Goodbye to Magnetic Strips

Over the last few months, Americans have been receiving updated credit and debit cards that contain a computer chip, called an EMV chip. The name stands for EuroPay, MasterCard and Visa, the companies that originally developed the system.

Similar chip-and-PIN cards have long been used in Europe. As reported by Inc. Magazine, the U.S. has been behind the times in sticking with old-style magnetic strips that are easily duplicated by card forgers. In contrast to magnetic strips, EMV chips generate a unique code for each purchase — meaning that thieves can’t simply copy and paste the code.

On Oct. 1, new rules went into effect that made merchants financially responsible for fraudulent payment card transactions processed on old-style magnetic strip readers. The new rules were intended to pressure retailers into updating their point-of-sale (POS) technology. Consumer legal protections regarding credit card fraud remain unchanged.

Improved Security, but No Revolution

But chip-and-PIN technology has its limits — especially in the U.S., where new cards have the EMV chips but are not provided with PINs, which are entered by the cardholder as an additional layer of protection.

Accounts differ as to why PINs have not been implemented in the U.S. According to CNN, some executives argue that consumers would resist having to memorize the numbers, even though debit card users are already familiar with using PINs at ATMs and POS terminals.

And as reported at The Oregonian, the rollout of EMV chip-reading technology has not been entirely smooth. Retail merchants have invested heavily in new POS card readers only to find that card issuers’ back-end support for the technology is still lagging.

Protecting Against Payment Card Fraud

All of which means that while chip-and-PIN technology (or even just the EMV chips) is an improvement in payment card security, it is no revolution. For one thing, the technology is designed to limit fraud through physical copying, duplication of cards or other abuses related to card-reading devices. The chips do nothing to protect against online payment card fraud, which depends on account numbers and passwords rather than the physical cards. As one security expert noted, computers and mobile devices don’t have card readers attached.

For consumers, the need for basic self-protection against credit or debit card fraud remains. Because magnetic strips have not disappeared and some merchants may continue using old-style card readers for some time to come, report a lost or stolen card promptly. Physical card fraud will become harder, but your card issuer needs to know if your card has fallen into the wrong hands.

Continue to check statements for any purchases that you did not make. This is especially true for online purchases, which chip-and-PIN cards do not help protect, but statement checking remains a basic protection for all payment card purchases. The world of payment cards has not really changed that much, and neither has the need for prudence in safeguarding yourself.

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Rick Robinson is a writer and blogger, with a current 'day job' focus on the tech industry and a particular interest in...