A recent column by Penny Crosman on whether cards with newer chip technology should be paired with a signature or PIN, for added security, came down squarely on the side of using PINs. But the article overlooked a key fact in the debate: neither is the most important defense against fraud. It's the chip that matters.
Whether a card with Europay MasterCard Visa technology is accompanied by a PIN or a signature, the new computer chips embedded in credit cards are an important security upgrade that better protect consumers' financial data. The chip replaces the consumer's account information with a one-time code each time the card is dipped at a chip-enabled terminal. This innovation makes the data flowing through retailers' systems practically worthless to hackers. Because chips are nearly impossible to counterfeit, they will help stop a majority of in-person card fraud. All the more reason why retailers should install and activate their new terminals in time to protect consumers this holiday season.
This transition to the new technology has required substantial investment on the part of both banks and retailers. Banks have been moving quickly to put this security upgrade into consumers' wallets. Most people have at least one chip card now, and we estimate that 575 million chip cards will have been issued by the end of 2015. To make the payments system more secure we all must work together — banks, payment networks, retailers and consumers — to implement the latest technologies to stop criminals. It's also important to remember that whether consumers use signature or PIN, they are not liable for fraudulent purchases.
Chip cards are part of a greater effort being made by banks and networks to combat hackers. Securing transactions goes beyond any one static measure, like a PIN, which is why we favor a more comprehensive and dynamic approach to stopping fraud. Our industry is deploying modern technologies, including tokenization, encryption, and biometrics to address evolving threats. Rather than fixating on a single method that only addresses a small and steadily declining share of fraud, we hope others will join us in developing and deploying the array of innovative technologies that are necessary to stop criminals today and in the future.
Jess Sharp is senior vice president and executive director of the American Bankers Association's Card Policy Council.