The Costs Of Using PIN-less EMV Cards And POS Fraud

Jan 31, 2020

When the use of a magnetic stripe shifted towards EMV chip cards, it was marked as the most prominent payment development in the 21st century. Chip cards have been lauded for their improved security and functionality, but they are still missing the mark when it comes to addressing vital authentication problems, leaving retailers to deal with the mess.

Stephanie Martz, senior vice president and general counsel of the National Retail Federation, said, “There has not generally been as reliable a system of authentication in the U.S. as there is in the rest of the world.”

The way EMV cards work is that they store all payment data within integrated circuit chips instead of magnetic stripes. The name “EMV”, originally stood for Europay, Mastercard, and Visa, the three credit card companies that developed the system. The standard now is managed by EMVCo.

The very first EMV card was created back in 1994, however the technology did not become widespread and worldwide until the 2000s. A recent study demonstrated that 76.7 percent of all credit card transactions are now made using EMV cards.

Europe was the first region to adopt EMV technology. Today, more than 99 percent of its credit card transactions are now made with chip cards. Following close behind are Africa, the Middle East, and most of North America. Almost 68 percent of Asia’s transactions are using this technology as well. However, the United States is last, with only 59.2 percent of the country’s card-present transactions made with EMV between July 2018 and June 2019.

It might be odd that, with the U.S. having some of the world’s most advanced tech companies, is dawdling far behind in the use of EMV. Martz credits this country’s reluctance due to a perceived lack of speed.

Apparently, when the chip cards made their debut in the market, they were a little slow, even for in-person transactions. People were getting frustrated, having to wait for more than two minutes for the transaction to go through.

In spite of this inconvenience, the results of using EMV have improved security since it was harder to falsify microchips than “spoof” magnetic stripe data. Even though the rate of POS fraud has decreased due to EMV chip cards, in terms of counterfeit cards, fraud still persists when it comes to lost or stolen cards.

This is because there is a lack of proper identity identification measures, further contributing to the weakness of using these cards. In Europe, they use both chip and PIN measures to secure their EMV card transactions. It requires customers to verify their identities as if they were making a withdrawal at an ATM. Historically, signatures were a favored means of authentication, but it seems to have lessened in use. It’s important to note that signatures have never been a truly reliable way to authenticate transactions.

In Conclusion

Even though EMV cards are largely more secure against counterfeiting than magnetic strip cards, they are still defenseless if they are ever lost or stolen. Martz believes the solution ultimately lies in enforcing the same PIN standards in the U.S. and Europe.

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