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Fraud Problems with New American Credit Cards

Posted by on Nov 24, 2015

Fraud Problems with New American Credit Cards

On the 5th November, the US credit card merchants and issuers reached the deadline by which they needed to transition to chip and pin technology. This has been commonplace in most of the world for over a decade, yet the US has surprisingly remained stuck in the past with the old magnetic strip technology being used on cards of all types. However, card issuers are causing trouble which is leading to fraud problems with the new American credit cards.

Chip and Pin Technology Lowers Fraud
The migration from credit cards that store data on a magnetic strip to cards that use chip and pin technology has lowered card
counterfeiting and fraud throughout the world. However, with the US not going full-in on the new technology, the liability for fraud will be determined by who has the lesser technology out of the merchant or the credit card issuer. The reason for this is that the US is not embracing the technology that the rest of the world uses.

EMV stands for Europay, MasterCard and Visa, and is a form of technology that was developed in 1994. Basically, it involves issuing card chips without chip and pin functionality. So whilst US cards will still have a small chip inside of them, when customers go to purchase goods they will still be asked for a signature as opposed to a four digit number.
Card issuers have stated that they don’t want to burden US consumers with having to remember another four digit number, however signatures are pretty much useless and it’s a lot easier to forge a signature than it is to get hold of someone’s chip and pin number. Plus, people pay very little attention to what is scrawled on a receipt – the only time they get looked at is if a customer queries a transaction that they don’t believe they made. It’s outdated technology and there’s no reason for the US to still be using it.

Credit Card Issuers and Consumers are Behind

Even with this knowledge, the credit card issuers have openly stated that the majority of customers won’t have chip and pin enabled cards by the November 5th deadline. Only 4 in 10 MasterCard customers have chip and pin enabled cards. A survey completed by NerdWallet also found that over 40% of Americans aren’t even sure why chip and pin enabled cards are safer: the answer is that they’re a lot harder to counterfeit than cards with a magnetic strip.
The senior vice president of payments and cyber security policy, Doug Johnson, says that when the industry started making the move to EMV, things got a bit confused. The card companies wanted to invest in making cards counterfeit proof without going the whole way and dolling out PIN numbers. However, this has left the US in a kind of middle ground with large numbers of people not understanding what is going on at all. It will be interesting to see what happens once the deadline passes.

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