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Why Alternate Payment Schemes Get No Love
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Drew Conry-Murray
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Drew Conry-Murray,
User Rank: Ninja
2/14/2014 | 10:07:55 AM
Chip and PIN will win
Chip and PIN (EMV) is going to win out in the long run, for exactly the reasons you lay out: it won't require a lot of effort on the part of consumers. We're accustomed to PINs already with ATM cards. And as breaches continue to happen, the pain of upgrading to chip and PIN will start to look acceptable to banks and retailers when compared to costs of reissuing cards, eating fraudulent transactions, and so on.


Chip and PIN isn't perfect. As you note, it doesn't do anything for transactions without the card present (like online or phone purchases), but it's a lot better than the system we have now.
Marilyn Cohodas
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Marilyn Cohodas,
User Rank: Author
2/14/2014 | 10:15:34 AM
Re: Chip and PIN will win
Agree, Drew. And it's proven technology in Europe already....
Lorna Garey
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Lorna Garey,
User Rank: Author
2/14/2014 | 10:21:56 AM
Re: Chip and PIN will win
I actually now have an EMV card, but have yet to notice a PoS system that takes advantage. And all that stops is fraud with the physical card. The back end is still wildly insecure. You wrote about PCI how many years ago, and the Verizon report shows not much has improved.

I agree the US will gradually move to EMV. However, is that just a false sense of security?
Laurianne McLaughlin
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Laurianne McLaughlin,
User Rank: Apprentice
2/14/2014 | 10:51:35 AM
cash is king
Aftre the Target breach, are you using cash more often? I am. I almost feel guilty using my debit card at the supermarket. To Lorna's point, consumers must see an upside in the alternatives.
Drew Conry-Murray
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Drew Conry-Murray,
User Rank: Ninja
2/14/2014 | 10:55:53 AM
Re: Chip and PIN will win
Right, there will be significant effort to upgrade PoS systems, which is one of the reasons for reluctance to move to chip and pin, because that upgrade will be expensive. And yes, the back end is still wildly insecure. However, my understanding is that most of the credit card fraud that occurs is from cloned cards. Chip and PIN prevents the use of cloned cards. Chip and PIN won't end fraud, but it should put a significant damper on it.

If we could move to Chip and PIN, and maybe also work out a robust tokenization method (that is, instead of storing card data, retailers store a token associated with a transaction), we'll have a much more secure back end. Of course, the devil is in the details, and there are a lot of details.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
2/14/2014 | 11:23:07 AM
Re: cash is king
No, I still use a credit card for nearly everything -- I'm exactly the person Lorna describes, who figures the risk falls on someone else. The only things I can remember paying cash for the past two weeks are a middle school basketball game admission and a parking meter (and more street parking systems around here are starting to take credit).
Lorna Garey
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Lorna Garey,
User Rank: Author
2/14/2014 | 11:37:07 AM
Re: cash is king
The arc of history bends not only towards justice but towards convenience. On Monday, I didn't even slow down at a toll plaza (EZPass can now read at 55 MPH). I no longer need to research new artists; Amazon tells me what I want. Heck, I can deposit a check by taking a photo of it with my phone. Cash is convenient for very small purchases like those Chris describes, but overall, people prefer to use plastic, if only to rack up whatever rewards they get. That 2% back adds up over time.

While I agree chip and pin will help, unless CC providers figure out how to meld convenience and security, the field is open for a disruptive new tech. Just wish I knew what it was ..
jagibbons
IW Pick
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jagibbons,
User Rank: Ninja
2/14/2014 | 12:43:27 PM
Re: Chip and PIN will win
While EMV will cut down on clone cards, it is still possible. Most data that is used to create cloned cards are gathered via various methods that fall into the skimming category. Once you get access to the data in transit between the customer and the back-end system, you've got everything you need. A different kind of card doesn't really solve that data transit issue.
jagibbons
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jagibbons,
User Rank: Ninja
2/14/2014 | 12:46:15 PM
Re: cash is king
As Chris states, as long as the risk lies with the retailer or the bank, there's little incentive to use cash. If your wallet with a credit card in it is stolen, you're inconvenienced while you call to cancel the card and wait for a replacement. If your wallet full of cash is stolen, you're flat out of luck.
bwalker970
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bwalker970,
User Rank: Strategist
2/14/2014 | 2:07:43 PM
Re: Chip and PIN will win
What glares in the grocery line?  Many people pay for groceries with a debit card which, surprise, requires a PIN. So the complexity of a chip and PIN transaction is no more involved or inconvenient than a transaction involving the debit card purchase.  It's actually more convenient than writing some semblance of your signature on a digital touch screen.  Now there's security for you.  Not only does the POS device capture all of the data necessary to clone your credit card, it also captures a copy of your signature and possibly the pen motions that you use to write that signature.  In the end, the credit card issuers are not on the hook for any fraudulent activity because they simply pass on all of the excpenses to consumers. So, all of us pay for the fraud because the credit card issuers and retailers are too lazy to replace an ancient and decrepit payment system that is in desperate need of replacement.

The argument for convenience is just a diversion.  The real argument is who is going to pay for the transition that everyone knows needs to occur.
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