On October 1, 2015, the standard for credit and debit cards will be renewed. Security chips will become the new standard for the credit card industry. While this change will not be mandated by law, it will represent the result of a new agreement between the credit card companies, card issuers, and retailers.
For some time, Europay chipped cards have prevented fraud throughout Europe. Of course, the United States payment processing industry hopes that these new cards will do the same in America. This change will shift fraud liability to retailers and card issuers that do not adopt the new chipped cards since these new cards are much more difficult to counterfeit. Magnetic stripe cards, on the other hand, have plagued the credit card industry for quite some time.
According to the Los Angeles Times, over half of the credit card fraud in the U.S. involved counterfeit cards. While full compliance is not expected until 2017, any reduction in the level of card fraud will be beneficial. The Federal Reserve has calculated that, in 2012, there were 13.7 million fraudulent credit transactions that total $2.3 billion in charges.
Chip card readers are located on the front of PIN pads. In the U.S., they may require the use of a PIN or a signature. Some security analysts say that cards which require a PIN are more secure since signatures are not verified on a normal basis. Other analysts point out that the more often a PIN is used, the more chances there are that it can be captured.
More information is available from the Consumer Financial Protection Bureau’s blog.