CUNA Mutual Group Risk Consultant: Adopt Pin And Chip Technology Now

From CUNA Mutual Group Public Relations

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LAS VEGAS – Magnetic stripe card technology is going away, but it continues to pose a significant fraud risk for debit card issuers still using it, a CUNA Mutual Group risk manager told a breakout session audience Friday, at the 2011 ATM, Debit & Prepaid Forum.

Ann Davidson, senior risk management consultant, encouraged card issuers to move away from magnetic stripe cards and adopt more secure chip technology.

“The U.S. is a magnetic stripe fraud hot spot particularly for debit cards, since we’re among the last country to migrate to chip technology,” Davidson said. Criminals are using skimming devices and other sophisticated technology to capture the magnetic stripe and PINs, which is translating into a growing trend of debit card magnetic stripe and PIN fraud.

Citing a recent Nilson Report study, Davidson said U.S. card fraud is double that of global fraud. The U.S. loses 9 cents to fraud for every $100 worth of credit and debit card transactions, while the global average is 4.5 cents. “Many of the card fraud losses are occurring at ATMs, where in the U.S., they’re being referred to as “Automated Theft Machines.”

The days of lone perpetrators peeking over a card user’s shoulder to obtain a PIN are long gone. Today, data breaches and skimming equipment at ATMs or at the point of sale are providing easy money for crooks. Outdated magnetic stripe technology is an enabler, and as long as there are available victims and the thin black line on the card is used, the fraud schemes will continue.

Davidson said accelerating the deployment of chip technologies will create a much more secure payment environment.  It will also continue to move the U.S. payment infrastructure toward using mobile payments by building the necessary infrastructure to accept and process chip transactions that support either a signature or PIN at the point of sale, Davidson added.

The introduction of dual-interface chip technology and dynamic values for “each transaction” will greatly reduce magnetic stripe fraud, since the data will be far less useful or attractive to criminals.

Some U.S. merchants are already accepting contactless transactions today, she said. Visa will require U.S. acquirer processors and sub-processor service providers to be able to support merchant acceptance of chip transactions no later than April 1, 2013.

As cards are issued and reissued (both Visa- and MasterCard-branded products), Davidson said CUNA Mutual Group is encouraging credit unions it insures to adopt chip technology to secure payments into the future. Credit unions should check with their card processor to determine if chip technology is available. As the payment infrastructure evolves from magnetic stripe to devices such as EMV (Europay-MasterCard-Visa) chip technology and NFC (near field communication) mobile phones, it is critical that cardholders can continue to conduct their payment transactions.

“Ultimately, consumer education will be a key as more debit card issuers offer chip technology and more merchants accept or require chip technology for payment transactions.

Davidson offered card issuers the following best practices to avoid debit card fraud and successfully migrate to chip technology:

  • Check with your card vendor to determine if chip contact and contactless technology is available for your card program and, if available, start enhancing your card programs to include chip contact and contactless technology
  • Educate staff and card holders on how chip technology and dynamic authentication works to secure transactions
  • Provide your cardholders with educational material, such as, don’t swipe at the point of sale
  • Get involved and network with other card providers to understand the impact of this change
  • Review all releases from Visa Inc. on the acceleration of chip migration and U.S. Liability Shift Program and MasterCard’s release announcement on chip liability shift program for Maestro ATM transactions

CUNA Mutual Group insurance, retirement and investment products provide financial security and protection to credit unions and their members worldwide. With more than 75 years of true market commitment, CUNA Mutual’s vision is unwavering: To be a trusted business partner who delivers service excellence through customer-focused products and market-driven insight. More information on the company is available on the company’s Web site at

CUNA Mutual Group is the marketing name of CUNA Mutual Insurance Society, its affiliates and subsidiaries, including CUMIS Insurance Society, Inc.  Product availability and features may vary by jurisdiction and are subject to actual policy language. Corporate headquarters are located in Madison, Wisconsin.

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