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Card Issuers Heed Call for Chip and PIN Technology

[Wednesday, July 1st, 2015]

Magnetic stripe credit and debit cards will soon be a thing of the past, with higher-security chip-and-PIN cards slowly overtaking the payment card space.

Chip-and-PIN cards, which are already standard across Europe, Australia, most of Africa and South America, are becoming more and more common in the United States, which has been slower to adopt the new technology than other countries. However, the federal government has given credit card issuers and banks a push toward switching to the more secure cards, with President Obama issuing an Executive Order in October 2014 decreeing that all payment cards issued by the government use the new technology.

Payment security is paramount

Chip-and-PIN cards send an encrypted code to payment processors, making it harder for credit card-happy criminals to steal consumers’ information and make fraudulent transactions. Credit card fraud continues to plague the payment space, with thousands of consumers affected each year. ID theft is another issue that will be lessened with the expansion of the new technology, which safeguards consumer information better than magnetic stripe cards.

With chip-and-PIN cards, thieves cannot simply forge a signature or copy the information stored on magnetic strips. The encrypted chip and associated PIN are much more secure and provide a seamless payment experience for consumers, who can simply tap their cards against the payment terminal and enter their PIN for contactless payments.

Travel cards more likely to use chip-and-PIN technology

Credit cards aimed toward travelers, like co-branded airline cards and travel rewards cards, are already largely enabled with a chip and PIN. That’s because travelers are more likely to use the cards when visiting Europe, Asia, and other countries that employ the technology. Things like paying parking meters, paying for bus fare, and other automated payment situations often call for a chip-enabled credit card, and those who don’t have one are out of luck.

Some organizations dissatisfied with speed of adaptation

Organizations like ProtectMyData, a consumer education campaign, are putting pressure on banks that haven’t yet adopted chip-and-PIN cards. “The PIN is a necessary element of the equation to protect consumers,” said the group’s leader, Debra Berlyn. “The PIN requirement adds a distinct layer of security and complexity to each transaction that dramatically reduces fraud.”

Although the U.S. has been slower to come around to chip-and-PIN cards, there’s no doubt that within the next year or two, they will be more and more common.

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