It’s been more than six months since the spate of large retailer data compromises that prompted many consumers to question whether it is safe to use their debit and credit cards in stores. One positive from those unfortunate events is that we are seeing accelerated momentum around launching new payment technologies that will help prevent such events from happening again.
Today, advanced technologies work behind the scenes, continuously monitoring for potential acts of payment fraud – something I’m sure many of us have likely benefitted from when we receive a text alert or phone call asking us to verify a purchase. As a result, fewer than five percent of accounts exposed in data compromises have fraud resulting from the breach. And when fraud does occur, financial institutions ensure fraud victims are not financially responsible for someone else running up charges on their account.
Although not perfect, the system has served us well. But it’s time to evolve payments security.
Our job is to be more innovative at protecting cardholder data than criminals are at stealing it.That’s why the U.S. payment system is moving to chip-enabled credit and debit cards.
We’re putting the power and security of a computer micro-chip right into the card. And new estimates released Tuesday by the Aite Group suggest that by the end of next year, 70 percent of U.S. credit cards will feature these new chips.
That means consumers are going to experience this new technology soon, and how they pay at the check-out will be slightly different but still quick and convenient.
As this new technology rolls out, there are three important things consumers should know.
1. Dip Instead of Swipe
If you have been issued a chip card, rather than swiping the card at check out, you will now insert the chip card into a terminal. The chip provides an additional layer of security by generating a one-time use code in the transaction data that is passed through the payments network.
This feature makes chip card data nearly impossible to counterfeit and a less attractive target for cyber hackers to steal. Because the code can only be used once, the stolen data is of no value to the criminals.
Not all retailers will offer chip-enabled terminals right away, however. For those that don’t, you simply swipe your card. The terminal will provide instructions for what to do.
2. Leave It in the Terminal
After you insert your card in the terminal, it must remain there until the transaction is processed and the terminal instructs you to remove the card. The computer chip needs to communicate with the terminal in order for your purchase to be effectively processed. And the experience will be just as convenient as it is today.
3. Sign, PIN or Go
The last step will be to sign a receipt, enter your PIN, or pay and go just as you do today. Some banks and merchants have announced they will enable PIN, in addition to the security provided via the chip technology, so you may experience being asked for it more often. But in most cases, the verification method you use will stay the same.
Whether or not you enter a PIN or sign for the purchase, you will still be protected with the help of this new chip technology.
Eventually, chip cards can virtually eliminate counterfeit payment card fraud in the United States and throughout the world. Plus the move to chip will help us get to mobile payments faster and more securely.
Of course, we must still protect against e-commerce fraud where payments are processed without a physical card present. But here too, new security solutions are at hand. The payments industry is aggressively exploring more secure options like tokenization, which uses an alternative code, instead of your account number to complete e-commerce or mobile transactions.
Unfortunately, payment information is likely to be a target for hackers for some time to come. But smarter debit and credit cards are coming; and with them, enhanced safety and security for consumers across America.