Most credit cards in the United States will soon have computer chips embedded in them. Europe has already embraced chip-based cards for years. The U.S. could benefit from the added security they provide.
Protection from data breaches and hackers is needed
Last year saw a number of credit card security issues arise. The mass data breaches that occurred at retailers like Target and Home Depot, as well as the hacks that took place at Sony and Apple, make it clear that data security is needed. In a world of digital information, mobile payments and heightened e-commerce activity, any measures to secure customer information are welcome.
According to ComputerWorld, last week, a House Commerce subcommittee discussed the steps necessary in introducing possible data security legislation. In 2014, consumers and financial institutions were defrauded approximately $11 billion due to the work of hackers. Any initiatives to make data security stronger are obviously warranted.
Chip-based cards could be a strong solution to an existing problem
Credit cards embedded with microchips will make transactions and customer data a lot safer. Chips are more secure than magnetic strips and raised plastic numbers. Additionally, chip-based cards usually require a PIN for authentication as well. PINs are significantly more secure than signatures and provide a strong defense against hacker efforts.
ComputerWorld pointed out that in the United Kingdom, after the chip and PIN approach was adopted, credit card fraud decreased by 75 percent. Financial institutions and retailers in the U.S. would save considerable time and money if fraud could be reduced to that degree.
Retailers will need to upgrade their point-of-sale systems
Starting in October, the credit card industry will have a liability shift, according to Credit.com. Retailers will be required to update their credit card readers to be smart chip compatible. If a retailer fails to do so, and fraud or data breaches occur, the retailer will be responsible for the resulting liability. These new rules will have a positive effect on the payments industry, as point-of-sale devices will be upgraded and customer data will be better protected.
The news source noted that as per the Fair Credit Billing Act, cardholders who are victims of fraud are limited, by law, from having to pay more than $50 for the liability. Most card issuers, however, offer a $0 liability guarantee.
ComputerWorld mentioned that in 2013, according to a study on theft of information assets, 50 global firms and public entities saw 63,437 security incidents and 1,367 confirmed data breaches. The report described 2013 as “a year of transition from political attacks to large-scale attacks on payment card systems.”
The introduction of chip-based cards to the U.S. market will help ensure that in coming years, data breaches and fraud will be significantly reduced. Retail transactions are responsible for the majority of U.S. economic activity. Over half of all retail purchases are transacted with cards. Making credit cards safer is not only important for consumers, it is necessary for the overall economy. The only question remaining is: why not chips?Back To Blog