Alliance Suggests Move To Contactless Chip To Avert Fraud In U.S.

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Contactless card technology could be the answer to card fraud problems in the United States, Randy Vanderhoof, executive director of the Smart Card Alliance, tells CardLine. The organization's new white paper details the problem of fraud in the U.S. and how contactless technology could reduce it. The paper "provides a snapshot of the broad fraud problem in the U.S. and we attempted to identify the sources of fraud and what measures are in place to mitigate and prevent that fraud," he says. "The static data associated with magnetic-stripe cards continues to be a major source of fraud," in terms of skimming the data and creating counterfeit cards. He says contactless technology is the answer to the fraud problem because it already is used in the U.S. and because the technology introduces dynamic data that cannot be used for fraudulent transactions or fraudulent cards. "This dynamic data changes every time a contactless card is used," he adds. The fact that contactless technology already exists in the U.S. is one reason it makes sense to adopt it. Vanderhoof says one in 10 cards in the U.S. already are contactless. However, the most important move that has to happen is standardization, he says. The payments industry needs to form a strategy to prevent fraud by implementing a mandate that would require industry players to comply with standards to prevent fraud. Canada, for example, has implemented an edict that all merchants and card issuers must accept and issue chip-and-pin card technology to mitigate fraud by October 2010. The payments industry in Europe already has chip-and-pin technology in place through its EMV standards.