Smart Cards Headed This Way — Eventually
The Current State of Payment Card Fraud in the U.S.
According to the Nilson Report, one of the payment industry’s leading newsletters, the United States generated about 27 percent of payment-card purchases though accounts for nearly half of global payment-card fraud. The article cited statistics suggesting that the U.S. might be more susceptible to fraud, attributing this vulnerability to its delayed adoption of “EMV” technology. This system, named after Europay, MasterCard, and Visa, is more widely accepted in European countries and Canada.
Understanding EMV Technology
The technology employs an embedded chip in the card that, according to the article, effectively thwarts counterfeiters. This is because the chips send unique, varying numbers to payment processors with each use, instead of transmitting customers’ names and signatures. In Canada, pairing the chips with personal identification numbers enhances the security feature. This pairing reduces the cards’ vulnerability to data breaches since it does not transmit names, thereby keeping them out of the range of information that computer hackers typically target.
The Introduction of EMV in America
EMV may be coming to America after all, however, as American Express will, according to the finextra — another leading industry newsletter — is “begin issuing EMV-compliant cards in 2012 that will support EMV chip and PIN, chip and signature, contactless and mobile POS transactions.” “AmEx is requiring its merchants to have EMV-equipped POS terminals in place by April 2013. Once the new terminals are in place and retailers can show that 70 percent of their POS transactions are AmEx EMV-enabled, merchants will be released from some Payment Card Industry Data Security Standard reporting requirements.”
Implications for Merchants
Which, for merchants, might be simpler than the alternative. AmEx is initiating a fraud liability shift, similar to those enforced by Visa and MasterCard. Starting October 2015, for specific transactions, AmEx will shift fraud liability to merchants who have not embraced EMV technology.
Conclusion
In other words, change is coming. If you have any questions about securing your purchase information — or what EMV might mean for you — call your AVPS representative!
