The Retail Industry Leaders Association (RILA) issued the following memo on the increase in fraud in the United States due to outdate credit card technology.
TO: Interested Parties
FROM: Brian Dodge, EVP, Retail Industry Leaders Association
RE: Magnetic Stripe Cards Driving U.S. Card Fraud; Outdated Technology Makes U.S. Lead The World In Point-Of-Sale Malware Infections
DATE: December 5, 2014
More facts are emerging to support an argument that retailers have made for years; the outdated magnetic stripe technology on credit and debit cards is a key driver of cyber vulnerability.
A new report released by Trend Micro attributes the high level of point-of-sale malware infections to outdated magnetic stripe payment cards.
The United States accounted for 30 percent of worldwide point-of-sale infections, the leader by a wide margin. The malware infections detailed in this report could likely have been prevented by the use of more secure payment cards. The United Kingdom and Canada, where the more secure 'chip-and-PIN' cards are the national standard, accounted for only three and two percent, respectively.
Frankly, the United States cannot continue to lag behind in this regard. 'Chip-and-PIN' cards could reduce fraud in this country by 40 percent. It is time to make 'chip-and-PIN' the standard in the United States.
President Obama understands this, which is why he has already made 'chip-and-PIN' the new standard for the federal government.
Retailers are leading the way in the private sector in this regard and are on track to have 'chip-and-PIN' card readers in stores across America by next fall. Unfortunately, rather than embracing 'chip-and-PIN' technology, banks and credit unions have begun issuing consumer cards with a weaker chip-only technology.
Highlights From Trend Micro On Point-Of-Sale Malware Infections And Magnetic Stripe Dangers:
- Magnetic Stripe Cards Are Contributing To The Spread Of Point-Of-Sale Malware. “The United States tops the list of countries with the most PoS malware infections. This may be due to the wide use of magnetic stripe cards.” (“TrendLabs 3Q 2014 Security Roundup,” Trend Micro, Accessed 12/4/14)
- The United States Is A Top Target For Cyber-Attacks. “Taiwan and the United States were the two most targeted countries.” (“TrendLabs 3Q 2014 Security Roundup,” Trend Micro, Accessed 12/4/14)
Background On Magentic Stripe Versus “Chip-And-PIN” Payment Cards:
- “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 12/4/14)
- “Chip-And-PIN” Protected Canadians From The Effects Of The Home Depot Breach. “One reason why Canadians may be less exposed to the Home Depot breach, said Toronto-Dominion Bank public affairs manager Meghan Thomas, is the prevalence of ‘chip and PIN’ technology in this country. Most cards in Canada have electronic chips and require cardholders to type in a personal identification number when they buy something, making them less exposed to fraud than clients in the United States where that technology is not in as widespread use.” (Richard Blackwell, “Canadians Little Affected By Home Depot Data Breach,” The Globe And Mail, 9/25/14)
- “Chip-And-PIN” Could Reduce Card Fraud In The United States By Up To 40 Percent. “If the use of EMV payment cards in the United States leads to a fraud loss pattern similar to the patterns seen in France, the Netherlands, and the UK, then U.S. fraud losses could fall by as much as 40 percent.” (Richard J. Sullivan, “The U.S. Adoption Of Computer-Chip Payment Cards: Implications For Payment Fraud,” Federal Reserve Bank Of Kansas City, First Quarter 2013)
- 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)
- The Federal Government Recognizes The Security Benefits Of “Chip-And-PIN.” “These ‘chip and PIN’ cards, which have cut down on payment fraud considerably in other countries, will become the standard for Federal Government programs like SmartPay and Direct Express. We are working with these programs to ensure that we begin a replacement program on January 1, 2015, and will, within the calendar year, issue over one million new, more secure government payment cards.” (“Fact Sheet: Safeguarding Consumers’ Financial Security,” The White House, 10/17/14)