AMU Cyber & AI Homeland Security Privacy

The ‘Smart’ Credit Card Is Chipping Away at Fraud

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By Dr. Christina Steele
Faculty Member, School of STEM at American Public University

October is National Cyber Security Awareness Month. With that in the back of my mind, it was no surprise when I received my credit union statement this month to see “GREATER SECURITY, MORE PEACE OF MIND” plastered along the top advertising the new Visa card with chip technology.

I’ve heard about this technology being integrated into credit cards to try to combat the issue of credit card fraud. What I didn’t know is that this change is not just due to an emerging technology, but it also due to a law that goes in to effect this month that can hold sellers who don’t upgrade their equipment to the new chip readers liable for taking a fraudulent card.

Banks have wanted a more secure form of payment because they have generally been liable for fraud committed using their cards. The American Bankers Association estimates that bank account fraud cost the industry $1.74 trillion in 2012. The Payment Security Taskforce, estimates that about 40 percent of all card readers will accept chip cards by the end of the year.

The type of card being rolled out in the U.S. will still need a signature when you pay for something. Eventually the technology that will be used in the U.S. will be the same “Chip and PIN” technology used in the rest of the world, which has been reported to make a transaction up to 700 percent more secure.

With chip and PIN, the cardholder inserts their card and enters a four-digit password to approve the transaction. Security experts believe this is a very safe way to pay for things. However, while it is more secure, it is not infallible. Let’s explore those implications.

EMV — which stands for Europay, MasterCard and Visa — is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. The small, metallic square on the new cards is the computer chip, and it’s what sets apart the new generation of cards.

The switch to chip cards means receiving and activating new credit and debit cards and learning a new payment process. Instead of swiping the card, consumers insert the card into the card reader (also called “card dipping”). The card remains in the reader until it beeps, ending the transaction. However, this technology will not protect you from email scams, financial data already stored at the retailer or online credit card fraud.

The technology has been in use for over 30 years, but the U.S. has been very slow to adopt it due to the cost of the new cards and readers. However, America is the only first world country that still relies on magnetic strips and signatures for most credit-card transactions. It is also the only one in which the market in counterfeit credit cards is still consistently growing.

Our need for instant convenience will also play a role in creating more secure payment technology. We now have several ways to pay without physical cards by using our mobile device through applications such as Apple Pay, Android Pay, and Samsung Pay. Aside from offering seamless transactions, smartphone payments can be far more secure than using a physical credit card.

While mobile payment technology and smart cards have yet to be widely accepted by the U.S. consumer, they are the future in secure payments.

About the Author
Dr. Christina B. Steele is an adjunct instructor at American Public University System (APUS) and an Information Technology & Business Process Consultant for Science Applications International Corporation (SAIC). She received her Doctorate in Computer Science from CTU in 2013. She specializes in emerging technologies, virtual teams and how to best align technology with business.

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