New EMV Cards
For the past three years, U.S. banks have been replacing traditional magnetic stripe credit cards with new EMV cards — short for Europay MasterCard Visa — that store data on an embedded computer microchip that makes the cards more difficult to counterfeit. At the same time, retailers have been busy installing new chip card readers.
Throughout the rest of the world, EMV means chip-and-PIN, which requires users to enter a secret personal identification number to approve a transaction the same as withdrawing cash from an ATM. But the U.S. cards are chip-and-signature, so transactions are still approved with an easily forged signature (which card companies are currently phasing out but not replacing with a more sophisticated means of authentication). And while the chip can reduce counterfeit fraud, the absence of a PIN leaves the cards with no protection against the fraudulent use of lost or stolen cards and without backup in cases where the chip malfunctions or is circumvented. NRF believes chip-and-signature offers only half the security EMV is capable of and has repeatedly called on banks to issue chip-and-PIN cards instead.
Chip-and-PIN, which has been used in some countries for more than a decade, is the world standard for credit card security, and retailers believe U.S consumers deserve the same level of security as shoppers elsewher
Why it matters to all Retailers
Credit card security — a large component of overall data security — is one of retailers’ top priorities. U.S. retailers complained for years that traditional credit cards were fraud-prone, saying their magnetic stripes were easy to copy and that signatures were of little value in proving the person using the card was the legitimate cardholder. With magnetic stripe, banks usually absorbed the cost when a fraudulent transaction was made with a counterfeit card, but retailers were stuck with the cost when lost or stolen cards were involved, amounting to billions of dollars a year. As a result, retailers demanded chip-and-PIN, which protects banks, retailers and consumers alike by stopping both counterfeit and lost/stolen card fraud. When banks began issuing chip-and-signature cards instead, retailers were concerned that the opportunity to take full advantage of chip technology had been missed.
The switch to EMV has come at considerable expense to retailers because merchants, not the card industry, have been required to pay the cost of the new equipment, software and installation an average of $2,000 per chip reader or more than $30 billion nationwide. In addition, changes in fraud liability rules unilaterally imposed by the card industry in 2015 mean retailers face increased liability if fraud is committed with a chip card and the retailer does not have a chip reader. Retailers without a chip reader are now usually responsible for counterfeit fraud if a chip card is used, and remain responsible for most lost/stolen fraud when either a chip card or traditional card is used.
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