Why Are EMV Chip Readers Needed In The United States?
In 2013 the possibility of credit card and debit card theft became a stark reality for 70 million Target consumers. In what was one of the largest credit card breaches to date, the retailer stated that up to 70 million holiday shoppers were affected by the credit card breach between Nov. 27 and Dec.18, 2013. Fast-forward to March 2015, when Target agreed to pay up to $10 Million to settle a class-action lawsuit that was filed against the retailer.
After the Target breach, the American consumer started to pay closer attention to credit card breaches. As reported by Forbes in January 2015, at least 20 other credit card breaches occurred in major businesses from 2013 to 2014. According to the report, JPMorgan Chase acknowledged a massive data breach that affected 76 million households and 7 million small businesses. In September 2014, Home Depot confirmed that 56 million debit and credit cards were affected by a data breach. In short, by the end of 2014, credit card and debit card breaches were a major concern.
To combat credit card and debit card theft via hacked RFID readers, businesses are now required to implement a chip reading checkout system. RFID skimming is a type of counterfeit fraud that occurs when a hacker intercepts the wireless information that is sent from the RFID to credit and debit cards, as well as other potential documents. Once the hacker has stolen the information from the debit or credit card’s magnetic strip, they can then reproduce the card and rack-up charges. In 2014, it was estimated that RFID skimming accounted for approximately 37 percent of all credit card fraud in the United States.
The Benefits Of EMV Chip Cards
The new EMV Chip Card is meant to be a solution to RFID skimming. According to Brian Dodge, Executive Vice President of the Retail Industry Leaders Association, “Chip and PIN has been proven to combat fraud dramatically.” EMV Chip Cards contain a microchip with the data that is usually stored on the card’s magnetic strip. The new card readers are designed to scan the chip and process payment via a secure encryption.
The move to chip card technology has been supported by the fact that for years consumers have used these types of credit and debit cards in the UK and Canada. According to the UK Cards Association, the EMV Chip Cards have helped to reduce certain types of fraud by 67 percent. With this benefit in mind, it is important to note that there are two types of EMV Chip Cards.
- Chip and Pin Cards — These cards use a two-step authentication process that requires the consumer to insert the card and type in a four-digit pin.
- Chip and Signature Cards — These cards use a two-step authentication process that requires the consumer to insert the card, sign their signature, and then have the signature checked against what is written on the back of the card.
Both types of EMV cards have a number of benefits for both businesses and consumers.
- Fraud is reduced via a cryptographic key.
- The cryptographic key is used to authenticate a credit or debit card.
- One-time codes are created for each transaction, so that hackers can’t try to steal or duplicate the codes.
- Hackers might be able to access the account numbers; however, they won’t have the encryption codes needed to recreate the card.
While the new credit card chip reader typically costs between $500 to $700 per unit, many businesses have already jumped at the chance to protect their consumers. In fact, approximately 70 percent of all credit and debit cards are expected to have the EMV chip by the end of 2015. As seen with the Target credit card data breach, when a breach occurs it is sometimes up to the retailer to pay the cost of damages. Aside from paying a hefty settlement, Target lost a lot of customers. According to USA Today, immediately following the breach, Target saw a 10 percent reduction of household shoppers online and in-store. Lower-income customers declined by 30 percent and Gen-X shoppers, ages 32-49, declined by 15 percent from the previous year. In short, data breaches not only cost businesses lost revenue, but they also can cause a decrease in consumer trust and loyalty.
The Bottom Line
The new EMV credit cards are a vital step to help businesses combat hackers and credit or debit card fraud. By installing the systems, businesses can help to show their consumers they take data security seriously. In doing so, businesses can not only improve consumer trust and loyalty, but they can also help to mitigate the risk of future credit or debit card security breaches.
Whether you choose to install the new EMV credit card machines, or choose to rely on the older RFID readers, we recommend that you take the time to check both the consumer’s ID and the credit card. Make sure that the signature matches the signature on the back of the card, that the ID is an exact match to the name on the card. When in doubt, ask for a secondary card to confirm that all credit cards have the same name. These simple in-person steps can help you avoid a costly debit or credit card breach.