As American families prepare to spend an estimated $14 billion this Father’s Day, family businesses are stocking up on those special gifts dads everywhere will cherish. However, consumers and businesses are not the only ones gearing up for the holiday – criminals across the world continue to target Americans, especially during large spending holidays, in large part due to our substandard credit card security.
It has been more than eight months since the Oct. 1 “liability shift” which promised to be a landmark date finally moving America’s credit card security into a new era. Family owned small businesses across the country have spent the last year or more investing in new software and hardware in order to be able to accept new EMV credit cards with embedded computer chips. These upgrades are expensive, time consuming, and complex, so it’s been especially difficult for family businesses that often operate on very thin margins. Regardless of these obstacles, many completed the upgrades and made the necessary investments as at least over a million merchant locations are now chip-enabled.
Unfortunately, despite the investment made by countless small businesses across the country, our credit cards still remain vulnerable to fraud. The reason being, banks and card issuers chose to issue chip and signature cards as opposed to the more secure chip and PIN cards used by the rest of the developed world. Many European countries have been using chip and PIN cards for years now and have all seen significant declines in credit card fraud.
While banks and card issuers were right to do away with the half-century old magnetic stripe cards in favor of chip-embedded cards, the decision to continue relying on our easily forged signatures as a method to verify purchases means our credit card transactions are still unnecessarily insecure.
Chip and PIN cards, on the other hand, are similarly embedded with chips but require a unique numeric code to be entered upon each point-of-sale transaction, eliminating the possibility of a thief forging a signature. This two-factor security system addresses counterfeit card fraud, lost/stolen fraud and online fraud – which accounts for 96 percent of fraud in the US.
Regardless of the clear advantages of the chip and PIN, banks and card issuers have been unwilling to budge. Instead, they provide numerous excuses as to why they have chosen to forgo PINs. Their claims range from consumers can’t remember another PIN – although Americans seem to do just fine remembering all sorts of number passcodes every day– to PINs are static numbers that can’t be changed – although a PIN number can be easily changed with a simple phone call to your bank.
While chip and PIN cards will not stop all forms of credit card fraud, they are a proven and easily adoptable technology that could be implemented to better fight common forms of credit card fraud. So as we head into another busy shopping weekend, it’s all the more confounding as to why the banks and credit card issuers still refuse to use all the means at their disposal to protect American shoppers and the businesses they’ll visit.
Palmer Schoening is chairman of the Family Business Coalition in Washington.