Credit Card Chips

To further push towards EMV adoption in the U.S, Obama signs ‘Buy Secure’. The EMV standard will require credit card companies to stop relying on magnetic stripes as the standard way to read data from credit cards, and move towards embedded chips which will offer more security. The planned date for EMV was previously October 2015. However, with recent credit card data theft, lawmakers and credit card companies believe that this transition needs to happen faster. With Obama’s ‘Buy Secure’, the federal government will be the first to adopt this technology. Newly issued and existing government credit cards and all payment terminals at federal agencies will switch to the new standard very soon. Institutions like the United States Postal Service are already in the process of upgrading their terminals. Furthermore, the White House said that with Obama’s new bill, Home Depot, Target, and other large retailers will have to upgrade their payment terminals by January of 2015.

The chip technology offers more security as it creates a new unique code for every transaction when the card is swiped, so stealing card numbers is made more difficult. Furthermore, the unique code is tied to a single transactions and getting access to the code cannot be used again for future transactions. User’s also have the choice of adding a pin code to further secure their transactions. EMV standard is considered much safer than the magnetic stripes, as magnetic stripes have the entire card number embedded in the magnetic strip. In Europe the transition occurred a decade ago, and it greatly reduced the number of credit card fraud through payment terminals. Consumers who already have the chip in their card might still have the magnetic stripes for backwards compatibility until all terminals are fully upgrade by October 2015.

The White House also said that it is working on informing the public about credit card fraud, how they can protect themselves and what to do in case their information is stolen. The government will also try to provide consumers with their credit score for free so they can actively monitor changes in their credit history. However, it was vague how this will be implemented. As many companies still sell credit scores as a subscription based service, and full credit reports can be obtained yearly.

It is clear that this EMV standard is much more secure than the original magnetic strip.  According to Australian Payment Clearing Association counterfeit fraud was reduced from $66 million to $37 million with the introduction of this standard in 2011. So I think that Obama’s ‘Buy Secure’ is a step in the right direction. However, it doesn’t offer much security. Obama’s bill simply states that government will lead by example and start adopting the chip standard. The bill does not force retailers to follow the new standard and their deadline is still October 2015. Furthermore, even after October 2015 retailers who have not adopted the EMV standard will not be fined, unless their customer’s credit card information is breached.

Sources:

http://apca.com.au/docs/2014-media-releases/new-payments-fraud-report.pdf

http://arstechnica.com/business/2014/10/obama-signs-buysecure-initiative-to-speed-emv-adoption-in-the-us/