Understanding fraud prevention technologies
Data theft has become an issue that affects the lives of nearly everyone in the United States. At least six bills active in Congress this year aim to help mitigate problems with data security standards and practices. Yet, legislation is not necessary to take an immediate and giant leap forward toward better data security. Consumer credit card transactions should be much more secure — and could be today — but it continues to unnecessarily lag behind the rest of the world.
In October 2014, President Obama issued an Executive Order calling for all government-issued payment cards to be equipped with chip and PIN technology — the most secure payment system available today. Chip and PIN is the preferred security all over the world as it is used in most of Europe and Australia, as well as many parts of Africa and South America.
However, the big banks that issue major cards, credit unions and other financial institutions have not taken similar steps to protect their customers. Instead, they are replacing existing magnetic stripe cards with microchip-equipped cards that still rely on unsecure signatures as a form of verification.
“While it’s a small step in the right direction, they are consciously failing to protect their customers by not offering all of the available security measures. The PIN is a necessary element of the equation to protect consumers,” said Debra Berlyn, leader of ProtectMyData, a consumer education campaign advocating for the implementation of chip and PIN technology for credit and debit cards. “The PIN requirement adds a distinct layer of security and complexity to each transaction that dramatically reduces fraud.”
Financial information stored on existing payment cards’ magnetic stripes can be easily cloned and used to make counterfeit cards. What’s more, the signatures can be easily forged and are rarely ever used to verify the identity of someone making a transaction.
Chip and PIN cards are considerably more secure. First, an embedded microchip encrypts each transaction at point of sale and then requires a unique four-digit code to be entered to complete the transaction, similar to withdrawing money from the ATM. The microchip coupled with the PIN make tampering and counterfeiting the cards, along with stealing personal financial data, nearly impossible.
The combination of chip and PIN clearly provides American consumers the security they deserve. Now, it’s time for the banks and credit card companies to issue cards outfitted with this technology.
Get the Facts
MYTH: Current payment security measures are keeping consumers safe.
FACT: Not really. Card fraud is still a major issue that affects millions of Americans each year. The United States accounted for 47 percent of worldwide card fraud losses according to recent reports.
MYTH: The United States is a global leader in credit card security, using the most secure and cutting-edge technology available.
FACT: The United States is lagging behind. In fact, the United States is the last G-20 nation to issue chip-equipped cards. U.S. banks and credit card companies have been slow to provide consumers with chip and PIN protections that are commonplace around the world.
MYTH: Chip-equipped cards without PIN requirements provide sufficient security.
FACT: Chip-equipped cards that rely on signature validation and not PIN technology do not fully protect consumers. Only the chip and PIN combination offers a two-step verification process that is nearly impossible to clone.
MYTH: Consumers are moving away from credit cards.
FACT: While payment alternatives like ApplePay and other mobile options are slowly entering the market, nearly three-quarters of all Americans had at least one credit card in 2014. Moreover, not every American consumer has the means to use more sophisticated mobile payment options and others — particularly consumers with more modest means — rely on paying with credit at times.
MYTH: The implementation of chip and PIN will drive hackers online, rendering in-store protections like PINs or signatures less important.
FACT: Brick and mortar stores remain a bedrock component of the American economy and the retail industry. Most Americans still rely on offline shopping for the majority of their retail purchases.
To learn more about efforts underway to help secure your everyday transactions, visit www.protectmydata.org.