Chip And Pin Is Coming, Finally
In less than a year, chip and pin technology will move from retailer’s “nice to have” category to “have to have.” That’s because in October 2015, all credit cards will be equipped with chip and PIN functionality. Goodbye, magnetic stripe, hello improved security. But, it won’t arrive in time for payment processing for the holidays, and that’s unfortunate.
It would be great if retailers were currently in the thick of implementation of the technology, and that the new readers would be in widespread use this holiday season. Unfortunately, this technology — which aims to make in-store transactions virtually impossible to counterfeit — still isn’t in most stores and won’t be commonly available until next year. That’s the case despite the well publicized data breaches at retailers such as Nordstrom’s, Target and Home Depot.
Experts say that credit and debit cards in the United States are about 10 years behind the rest of the world. Chip and PIN cards, also referred to as “smart cards,” are used globally; many in the payments world are shocked that the United States has been so slow to adopt the protocol. The magnetic strip system used in the United States is simple to hack as it requires customers to simply supply a signature to authenticate a purchase. It’s pretty easy for criminals with victims’ credit cards in their possession to begin making purchases. We’ve all heard horror stories of thousands of dollars being charged before the credit card was cancelled.
Other times, thieves can also use information obtained by Internet hacking or skimming — secretly swiping a victim’s card on a card reader — to create clones of unsuspecting customers’ cards. A version of that technique was used last year at Target when 70 million credit card number were stolen.
Chip and PIN thwarts cloning of credit cards. Criminals trying to use lost or stolen cards with chip and PIN must know the PIN in order to be able to use the card in a transaction. Right now, Walmart is the only major retailer that currently accepts chip cards in its stores.
Last week, President Obama signed an executive order requiring that by January 1, 2015, all retail payment card terminals at federal agencies will be able to accept the chip-and-PIN technology, and all federal government-issued cards should also be equipped with the technology. According to the order: “While the U.S. Government’s credit, debit, and other payment card programs already include protections against fraud, the Government must further strengthen the security of consumer data and encourage the adoption of enhanced safeguards nationwide in a manner that protects privacy and confidentiality while maintaining an efficient and innovative financial system.”
Still, it’s been — and will continue to be — a long road for retailers large and small to make the conversion from magnetic stripe. An estimated 5 billion magnetic stripe payment cards are in use worldwide, with 15 million magnetic stripe POS terminals in the United States, according to market research publication The Nilson Report. Credit card and debit card fraud resulted in losses amounting to $11.27 billion during 2012, according to Nilson’s most recent figures.
Retailers incur $580.5 million in debit card fraud losses and spend $6.47 billion annually on credit and debit card fraud prevention annually, Nilson notes. RetailPro understands that saving on those costs would allow retailers to boost their bottom-lines and invest in better technology and increase inventories. We have recently partnered with payment technology innovator Merchant Warehouse to provide secure, value-added payment solutions. MW’s Genius Engagement Platform, can accept any payment type, and can even evolve to accept yet-to-be-developed forms of payment. As a contactless EMV platform, retailers using the Genius platform qualify for elimination of PCI compliance, in accordance with Visa’s TIP program.
To learn more about the Genius solution for Retail Pro, go to https://www.retailpro.com/Solutions/Genius.php
