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PIN authentication vs. signature authentication – which is stronger?

March 9, 2012

Retailers and consumers have an important decision to make when it comes to accepting PIN or signature authentication.

Retailers and consumers have an important decision to make when it comes to accepting PIN or signature authentication. While both have their advantages, a study on the rates of fraud loss by each verification method reveal that one may be significantly more secure, according to the Federal Reserve Bank of Atlanta.

The study found that when it comes to debit card payment processing, PIN authentications result in far fewer losses than transactions verified with signatures.

Fraud losses from all debit card transactions at point-of-sale terminals reached the highest levels in 2010 at $880 million, according to The Nilson Report. Signature debit payments represented $804 million of those – just over 91 percent – reports the Federal Reserve Bank of Atlanta.

“The effectiveness of PIN authentication in preventing payment card fraud becomes clear,” Douglas King wrote for the source. “Based on per-unit fraud losses of credit and debit cards, financial institutions have significantly more exposure to fraud losses from card payments with signature authentication than from those with PIN authentication.”

To best protect customers from fraud losses, retailers should encourage PIN authentication when accepting debit cards. Additionally, they should make sure to follow PCI compliance standards to securely process payments.

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