Chip and PIN: The Courting Period is Officially Over

The U.S. market has had a love/hate relationship with chip and PIN card technology, and the courting period has been long and rocky. As a former fraud executive based in the UK, I have observed first-hand the implementation of chip and PIN and the benefits it provided to banks, merchants, and customers.

Until recently, I would consistently hear from the US market “we will never go chip and PIN” or “we do not have the business case”. While that initially may have been true, given the scale of change from the standpoint of the fraud losses, the real driver, as I always suspected, would be customer experience and customer confidence combined with strength of security.

The Target data breach has become that watershed event that may very well move the U.S. forward with chip and PIN, and more quickly than even proponents had expected. From my discussions with some of the country’s top financial institutions, the groundswell toward chip and PIN is most certainly taking place. Here’s what I’m seeing in the industry:

  1. Leading banks are already in the process of converting their domestic ATMs to chip as we speak, and it appears that some leading banks are ahead of schedule.
  2. Cards are being chipped, but Retailer point-of-sale equipment is lagging behind. The Target data breach should serve as a costly and timely reminder to make the investment quickly.
  3. The Target data breach, as well as other recent breaches, should turn the tide more quickly to compliance on the EMV standard. Target could act as a leader by announcing a plan to upgrade immediately.
  4. The kinds of data being hacked exposes different risks (online, mobile, card, ID theft, etc.) Chip and PIN provides the fraudsters with fewer options to drive their business case to hack.
  5. Customers are now educated on the immediate effect of a data breach and ease of skimming. They are becoming vocal about expecting more from their banks and retailers alike.
  6. Looking forward, the last bank or merchant to the chip and PIN “marriage” will put their customers most at risk since the fraudsters will work to penetrate the weakest link.

Now that security and fraud-related issues are at the top of customers’ minds, not to mention page one news, it is important more than ever for banks and merchants to look at cyber and fraud strategy on a regular basis. Chip and PIN is a great start towards thwarting some of the existing threats to card safety and security. The courting period may be over; I want an invitation to the wedding!

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