Cash or credit used to be the biggest question in the checkout line. Now? Swipe or insert. Chip cards — those using EMV technology — arrived in the U.S. a year ago this month, and despite cries from consumers, studies show the cards have cut down on fraud. MasterCard says counterfeit fraud costs are down 54 percent for U.S. retailers who have adopted the technology. Counterfeit fraud costs increased by 77 percent year-over-year among U.S. merchants who have not made the switch to accepted chip cards or have just begun the migration, according to the company. “There is no doubt chip cards will curtail fraud and it is exciting to see enhancements at the point of sale that will propagate usage, reduce friction and accelerate transaction time,” said Brian Riley, director of MasterCard’s Credit Advisory Service, Mercator Advisory Group. Visa reports counterfeit fraud at merchants able to process chip transactions dipped 47 percent in May, compared to the year before. There are now more than 363 million chip-enabled Visa cards and 1.46 million chip-enabled business in the U.S., making the country the world’s largest Visa chip market. What is EMV and why might it be safer? Let’s review. Cloning a regular “swipe” credit card is easy: thieves can copy the data on the card’s magnetic strip and write that information onto a blank card. Just like that, the card can be swiped for fraudulent purchases. Banks and credit card companies have developed practices to sniff out stolen-card charges, but EMV — developed by Europay, MasterCard and Visa — take it a step further with an extra line of defense. The chips in EMV cards create as a single-use payment code for each transaction, which helps authenticate your purchases. The rollout in the U.S. market missed one vital step, though. Merchants and banks in Europe use a two-pronged approach to keep consumers secure: the chip produces a unique code, and the card carrier inputs a PIN number for each transaction. Without the PIN, industry leaders argue the United States forfeits that second level of protection. Detractors say the change and subsequent bump in security hasn’t been worth the hassle. “This whole transition has been a challenge for merchants and for our customers,” Mallory Duncan, general counsel for the National Retail Federation, told USA Today. “It’s not one we wanted. It’s extraordinarily expensive. It’s cumbersome, and worst of all it doesn’t really protect our customers to the extent we want.” While most MasterCard credit cards are chip ready (88 percent), just a third of terminals in the United States accept chip cards. Visa says 84 percent of merchants that haven’t upgraded are working on the switch. Based on adoption rates in other countries, Visa expects 90 percent merchant acceptance in the U.S. within four to five years. The National Retail Federation says delays by the card industry are to blame for the slow implementation. “Retailers have spent billions of dollars to install the new equipment but card companies have failed to sign off on the installations in a timely manner,” Duncan said. “Many retailers have had new chip card readers sitting next to their cash registers for a year waiting for the card companies’ blessing. We wish they cared as much about security as we do.”
