As you probably heard, both Target and Neiman Marcus had major data breaches these past weeks. So that lends itself to the question, “What is going to be done about it?” Obviously, this is a huge problem and the United States is looking into new technology that has already successfully been adopted in other countries – more secure credit card technology.
Europe has already started using chip-based “smart cards” and they could definitely be where the United States is headed. These smart cards are more difficult to counterfeit because the account information is encrypted and stored in an embedded microchip. And most transactions cannot be authorized without a PIN code, hence the name “PIN and Chip” technology.
Sounds great right? You’re not alone in your thinking.
Matthew Shay, president and CEO of the National Retail Federation, has called on Congress to move the banking industry towards the “PIN and Chip” smart credit card technology.
“As long as bank cards continue to be issued with outdated and fraud-prone magnetic stripe (and signature) security, it is clear American card holders will remain largely unprotected,” he wrote.
Shay hopes that retailers and banks/credit card companies can come together to reduce fraud seeing as fraud cost retailers and bankers more than $11 billion in 2012.
Frank Keating, president and CEO of the American Bankers Association, also wrote a letter to congress about hte issue.
Much has recently been made about the ongoing disagreements between the retail community and the banking industry over who is responsible for protecting the payments system. In our view,it is a shared responsibility of all parties involved. Our existing payments system serves hundreds of millions of consumers, retailers, banks, and the economy well, and we must work together to combat the ever-present threat of criminal activity at our collective doorstops.
Why is the U.S. slow to adopt this technology? Well basically it could be rather pricey and there’s a fear that the cost will burden consumers.
The United States, instead, has opted to stay with the magnetic strips which have been around for quite some time. Visa, MasterCard, American Express and Discover hope that the U.S. switches over to PIN and chip by October 2015.
I think we can all agree that something needs to be done.