With Independence Day fast approaching, record-high temperatures, and the last days of school for millions of students, summer is in full swing. To kick it off, families across the country recently celebrated Father’s Day, which reached record high spending of $14.3 billion.
According to industry estimates, consumers spent an average of $129.92 on their dads for the holiday. On what, exactly? Over $3 billion was spent at a restaurant or other special outing and $2 billion went towards clothing and other gifts. While smartphones and tablets can sometimes offer convenience and efficiency when shopping for friends and family, nearly 40 percent of consumers shopped at brick-and-mortar stores.
Given these statistics, it’s safe to assume that consumers rely heavily on using their credit and debit cards when making these purchases. Whether checking-out at a department store or paying the bill at a restaurant, cards will be swiped or inserted at payment terminals around the clock throughout the summer.
Many of the cards used at checkout probably feature EMV technology – the technical name for the microchip that is now embedded on the front of these cards – which houses our financial information and replaced the magnetic stripe. What hasn’t been replaced, however, is the need for our signatures in order to verify a transaction.
It goes without saying that a signature is a fairly arcane authentication method; it’s an incredibly easy thing to forge and won’t protect a consumer who loses their wallet or drops their credit card on the sidewalk. All the thief has to do is scribble on a screen or piece of paper and the purchase can be made.
To combat this problem, the international community – including Canada, Australia, the EU, and parts of Asia and Africa – implemented a variation of EMV technology, which replaced the signature requirement with a four-digit PIN code that is entered into the payment terminal during a point-of-sale transaction.
The PIN feature virtually eliminates the ability to use a stolen card or stolen financial information. Without knowledge of an individual’s PIN, the transaction cannot go through.
Despite resounding evidence that chip and PIN is a technologically superior form of payment security, financial institutions and credit card issuers continue to tout the unsubstantiated claim that consumers don’t want to remember an additional passcode. Yet our garage door openers, smartphones, and ATM cards require these codes and are hardly considered burdens in our everyday lives.
Last year, retailers and banks underwent a “liability shift,” whereby merchants across the country became responsible for upgrading their payment terminals to accept new chip-equipped credit and debit cards. In the event of credit card fraud, the financial burden now falls on whichever institution is using the older payment technology.
But understaffing, unrealistic deadlines and lack of resources left many businesses, both large and small, unable to meet that deadline. Moreover, many retailers – including heavyweights Walmart and Target – aired on the side of chip and PIN over chip and signature. Instead of spending considerable resources investing in a flawed security system reliant on signatures, they decided to protect their customers from financial fraud with the best security measures we have at our disposal today.
Unfortunately, the half-measure approach of equipping these new cards with only chip and signature defenses, instead of the clearly more secure chip and PIN combination, exposes American consumers to unnecessary risk. And while chip and PIN cards are not a cure-all for all credit card fraud in the United States, the fact that business leaders and security experts have coalesced around this technology demonstrates its value.
It is clear that retailers such as Target and Walmart are doing their part by updating in store point-of-sale terminals and cards to be chip and PIN capable, but our credit card companies and financial institutions need to take the same initiative to issue chip and PIN cards so that all American consumers are equally protected.
