Top business executives told the senate in a Judiciary Committee hearing this week that by October of 2015 all newly issued credit cards will be micro-chipped in order to reduce credit card fraud.
Credit card companies are dubbing this the end of the “swipe-and-sign and the beginning of the chip-and-PIN”.
Executives told the senate that “once the country transitions to the new system — which includes credit cards embedded with a microchip containing security data — these kind of hacking attacks will be much more difficult to pull off.”, in an article published by the Wall Street Journal.
The new global standard will be known as EMV(Europay, MasterCard, Visa) according to MasterCard’s company expert, Carolyn Balfany.
According to EMV’s website the new cards will come mounted with a metallic square on the front of an EMV contact card is known as the card’s contact plate. A microprocessor chip is embedded in a small cavity directly behind the contact plate, protected by a thin resin capsule. When inserted into a card acceptance device, such as a terminal, the contact plate allows the chip to connect to a reader. This connection enables the chip to get power from and exchange data with the terminal.
Businesses and banks who do not upgrade quickly to the new system will be heavily penalized by a new “transfer of liability“. The new system will allow credit card companies to transfer liability of credit card fraud to your local businesses and banks. If your local store is not up to date with all the new global standard payment system technology, it will become financially responsible for fraudulent purchases done with a stolen credit card.
“Our roadmap is what’s known as the ‘liability shift.’ Whenever card fraud happens, we need to determine who is liable for the costs. When the liability shift happens, what will change is that if there is an incidence of card fraud, whichever party has the lesser technology will bear the liability.”, said Balfany.
“So if a merchant is still using the old system, they can still run a transaction with a swipe and a signature. But they will be liable for any fraudulent transactions if the customer has a chip card. And the same goes the other way – if the merchant has a new terminal, but the bank hasn’t issued a chip and PIN card to the customer, the bank would be liable.”
Although the goal is to reduce credit card fraud, some technology websites, such as Wired, have called the new “secure” technology “flawed” and “vulnerable” to computer hackers by showing how easy it would be to steal a million dollars from multiple credit cards.