In a U.S. Senate Committee on Commerce hearing on data breaches yesterday, Senator Amy Klobuchar made the case for chip and PIN payment card technology, which would provide customers with the highest level of data protection known today.
In the face of this, the American Bankers Association (ABA) made the case against chip and PIN technology at the hearing dismissing customer concerns about breaches by saying that if customers "want to be protected by a pin, they can use their debit card." Apparently, if these customers want a PIN-protected credit card, they're simply out of luck.
Retailers have urged banks to migrate from chip and signature cards to chip and PIN cards. And banks continue to resist, despite the fact that the technology is used around the world and has been proven to reduce fraud.
When will banks embrace the next generation of payment cards and give their customers the freedom to have both convenience and security, rather than choose between the two? America's consumers expect their banks to protect them, and if they won't, they will take their business to financial institutions that will.
Senator Amy Klobuchar: United States Needs To Move To Chip And PIN. "Last year many of my colleagues and those in the media talked about the need to move to chip-and-PIN technology, similar to what we're seeing in Europe, Canada and elsewhere. Following the push for the change, the industry made a voluntary commitment as you know to switch over to chip-and-PIN cards and readers by the end of October 2015, which is this year. That's an important timeline for consumers and we learned from the Home Depot data breach that impacted both Canadians and Americans that cards from Canada were actually less valuable on the black market than American cards because they had chip and PIN technology. And we tended to be a target because we have not improved that technology, despite the work of companies like Target who have tried to. But as we know, it's not universal across the country." (Committee On Commerce, Science And Transportation, U.S. Senate, Hearing, 2/5/15)
In An Exchange With Senator Klobuchar, Doug Johnson Of The American Bankers Association Claims Customers Don't Want Secure Chip And PIN Credit Cards And The Minnesota Senator Refutes His Argument:
Doug Johnson, American Bankers Association Senior Vice President And Senior Advisor for Risk Management Policy. "One of the things when we have this conversation that we forget sometimes is the fact that the card market is really two different markets to some degree. It's the debit card market as well as the credit card market, and debit cards have PINs. So you essentially have more than 50 percent of the card market already that's PIN-enabled. But what we've learned from the credit side is that on the retail side, as well as our customer behavior, in the credit environment, our customers prefer to use the signature. If they want to be protected by a PIN, they can use their debit card. So they have effective choice to really accomplish that." (Committee On Commerce, Science And Transportation, U.S. Senate, Hearing, 2/5/15)
- Senator Klobuchar: " [Y]ou get more protection, and certainly with the situation that we saw with Home Depot where the Canadian cards were less valuable because they had that full technology – I can imagine that everyone would like ease. It's just like when we know that technology protects better it seems like we wouldn't just want it for debit card and sometimes I just know from having a bunch of cards in my purse, I don't really think through what kind of card it is or if it has a signature or not."(Committee On Commerce, Science and Transportation, U.S. Senate, Hearing, 2/5/15)
The Effectiveness Of Chip-And-PIN Cards, Including The PIN Function, Is Well-Documented:
"Chip-And-Pin" (EMV) Cards Have Cut Fraud Around The World. "Countries implementing EMV have reported a decrease in card fraud. As an example of the impact of EMV, the UK Cards Association has reported a dramatic reduction in fraud since the introduction of EMV cards: 'Fraud on lost and stolen cards is now at its lowest level for two decades and counterfeit card fraud losses have also fallen and are at their lowest level since 1999.'" ("EMV: FAQ," Smart Card Alliance, Accessed 2/5/15)
Use Of PINs Can Make Card Use 700 Percent More Secure. A 2013 study by the Federal Reserve found that using PINs in debit card transactions reduced fraud by 700 percent. ("2011 Interchange Fee Revenue, Covered Issuer Costs, And Covered Issuer And Merchant Fraud Losses Related To Debit Card Transactions," Federal Reserve, 3/5/13)
Elected Officials, Including President Barack Obama, Have Expressed Support For Chip-And-PIN:
President Obama: "We Know This Technology Works." "[W]e're going to begin making sure that credit cards and credit-card readers issued by the United States government come equipped with two new layers of protection: a microchip in the card that's harder for thieves to clone than a magnetic strip, and a pin number you enter into the reader just as you do with an ATM. We know this technology works. When Britain switched to a chip-and-pin system, they cut fraud in stores by 70 percent. Seventy percent." (President Barack Obama, Remarks By The President On Protecting American Consumers, Washington, D.C., 10/17/14)
Senator Mark Warner: "Push Harder To Require Banks And Card-Issuers To Adopt Better Anti-Fraud Security Features." "[W]hile chip-and-PIN safety features now will be required for credit and debit cards issued to federal agencies, I urge federal regulators to push harder to require banks and card-issuers to adopt better anti-fraud security features more widely for American consumers. Technologies like chip-and-PIN have resulted in significant reductions in fraud in many major G-20 countries, including the U.K. Yet despite a series of data breaches affecting hundreds of millions of American consumers in recent months, American card issuers and financial firms continue to issue and reissue less-secure signature cards." (Press Release, "Sen. Warner Urges Banking Regulators To Move More Aggressively To Address Consumer Financial Protections," Senator Mark Warner, 1/12/15)
Credit Union Executive Calls For Adoption Of Chip-And-PIN Technology:
Chip-And-PIN Is "The Most We Can Do To Fight Fraud." "Merrill Halpern, assistant vice president of card services at United Nations Federal Credit Union, said the potential inconvenience isn't a good enough reason to choose signatures over PINs. The credit union, based in Long Island City, N.Y., is one of the few credit-card companies that issues chip-and-PIN cards. 'We should be doing the most we can to fight fraud, and the only way to send that message is to stand clearly behind chip-and-PIN,' he said." (Robin Seidel, "Why New Credit Cards May Fall Short On Fraud Control," The Wall Street Journal, 1/4/15)
Big Banks And Cards Companies Are Still Out Of Touch, Supporting Less-Secure Chip-And-Signature Cards:
Discover: Moving To Chip-And-PIN Too "Difficult." "Chip-and-signature cards 'are such a big shift that we didn't want to make it more difficult than it already will be' by requiring a PIN, said Jon Krauss, senior manager for card payment strategy at Discover. The Riverwoods, Ill.-based card company will be issuing signature-based chip credit cards in 2015." (Robin Seidel, "Why New Credit Cards May Fall Short On Fraud Control," The Wall Street Journal, 1/4/15)
J.P. Morgan Chase: Chip-And-PIN Rollout Scrapped. "J.P. Morgan Chase, the nation's biggest card issuer, had initially planned to issue chip-and-PIN credit cards in 2014, but the bank put those plans on hold after testing them with consumers, according to a person familiar with the bank's strategy. The bank has issued millions of chip-and-signature cards." (Robin Seidel, "Why New Credit Cards May Fall Short On Fraud Control," The Wall Street Journal, 1/4/15)
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