Chipping Away: Bankers, Retailers Disagree on Details of New Card Format

An important deadline for an updated card format, coming up next week, is putting pressure on retailers and banks alike. The main sticking point around chip cards is the decision by the banking industry not to require the use of PIN numbers during transactions. Retailers say that leaves the cards vulnerable.

Starting October 1, retailers that have not upgraded to new payment technology will face increased exposure to fraud charges. Most have made the upgrade.

But retailers say the move toward chip cards (also referred to as EMV-compliant cards) isn’t going far enough, and they fault the banking industry for failing to embrace the use of PIN codes with the new cards. So-called chip-and-PIN cards are widely used in Europe.

“The chip cards are a step forward, but shoppers are concerned that they don’t go nearly far enough,” Mallory Duncan, senior vice president of government relations for the National Retail Federation, said in a recent news release. “Unless the new cards require the use of a PIN, they will only provide half the safeguards needed to stop increasingly sophisticated criminals. The card industry’s refusal to give consumers the full protection they want continues to be a huge disappointment.”

The Retail Industry Leaders Association echoed that complaint, arguing that while the retail industry is spending billions on card security, “banks and credit unions are not meeting the retail investment with the same commitment to consumer protection.”

But banking industry officials, including American Bankers Association Senior Vice President and Senior Adviser for Risk Management Policy Doug Johnson, say PIN codes are unnecessary with EMV technology.

“The EMV chip, not the PIN, is the key to keeping sensitive information safe by making the financial data nearly impossible for criminals to create, sell, and use for counterfeit cards,” Johnson wrote in a recent op-ed for The Hill. “In fact, nearly all of today’s fraud comes from counterfeit cards made with stolen personal and financial data or online theft. PINs only protect against lost and stolen cards, a small and rapidly diminishing portion of fraud, not counterfeiting or card-not-present transactions.”

Preparing for the Big Move

Whatever an organization’s stance on the chip-and-PIN issue, one thing is clear: It’s important to ensure members and others are ready for the change. Among the steps industry groups are taking:

The Electronic Transactions Association, which supports “flexibility” over a strict usage of chip-and-PIN, is holding a “Chip Card 101” event on October 1 in Washington, DC, for industry stakeholders, the media, and retailers.

The National Retail Federation recently co-hosted a webinar with the EMV Migration Forum designed to ensure that retailers are considering all the variables required for the move.

The American Bankers Association has largely been focusing its recent education efforts on consumers, creating an infographic that explains how the new chips work. “This chip technology is another layer of security for the millions of in-person transactions made every day,” ABA President and CEO Frank Keating said in a news release.


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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