Getting smart about chip technology
Over 13 million U.S. citizens fell victim to identity fraud last year, costing financial institutions a total of $15 billion. To better guarantee customer security in 2016, more and more credit unions are turning to Chip-and-PIN technology. Chip-and-PIN cards are quickly becoming the global standard in both credit and debit card payments. These new smart cards, or EMVs, utilize a computer chip embedded in the card to authenticate transactions. When this card is inserted into a chip-enabled reader, the chip on the card communicates with the reader by sending a one-time, dynamic code unique to that transaction.
There are a number benefits for both the customer and credit union in switching to the chip-and-PIN card technology. The unique transaction code makes it near impossible for criminals to develop a counterfeit card with data stolen from a Chip-and-PIN card. The security enhancements built into chip technology far exceed that of magnetic stripe technology and will be integral to helping reduce a credit union’s payment card data breach and fraud exposure when the physical card is used. Chip-and-PIN technology will also reduce exposure to card data compromises, which alleviates the time and resources used by a credit union to process fraud claims.
As smart cards become more widespread, adoption of the new technology has the potential to build on a credit union’s reputation and membership. In fact, many financial institutions around the world have already converted to chip technology. European Union countries rely exclusively on chip-and-PIN technology and often do not even accept chip-and-signature cards. This means adopting chip cards will also make it much easier for cardholders to travel internationally.
It is impossible to ignore the added benefits of adapting to Chip-and-PIN technology. However, while the new technology virtually eliminates fraud when a purchase is made in a face-to-face transaction, Chip-and-PIN does not address online, mail, telephone, or lost/stolen card fraud. Therefore, credit unions should continue to deploy multiple layers of protection and should enhance existing fraud detection systems to help combat fraud in both the card-present and card-not-present environments.