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2015-09-03

New credit card process aims to cut fraud

By Carolyn B. Edwards BCC Staff Writer

The swipe and sign credit card process is on its way out. Chip readers hope to stymie fraudsters.




Almost half of the world's credit card fraud happens in the US, despite the fact that our country only processes a quarter of all credit card transactions. In an attempt to cut those fraud numbers, a new credit card process is being phased in this month.
New credit cards will be embedded with a microchip containing security data and will do away with the old swipe and sign process we have all become accustomed to over the years.
According to Wall Street Journal's Tom Gara, recent "large scale theft of credit card data from retailers including Target and Neiman Marcus brought the issue [of fraud] more mainstream attention." Retailers claim the new microchip process will make such hacking attacks "much more difficult to pull off."
While much of the rest of the world switched to the chip and PIN cards years ago, the US has been behind the curve in making the change. A spokesman for MasterCard said one reason for that is because initially, fraud rates were much higher in other countries. As the new process went into use, fraudsters moved to the US.
The big card companies, like MasterCard and Visa expect to make the switch in October. Part of that timeline involves something called the "liability shift."
MasterCard explained liability shift as follows: "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.
"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."
According to Gara, "as banks issue consumers their new cards, they will get information explaining the system and all the benefits, and obviously how to use it."
The new standard of security will eventually be extended to contactless payments, where you tap the card against a reader, tags on phones for mobile payments, or a key ring fob.
Some Bandera businesses, like China Bowl restaurant and the Bandera County Courier, have already installed the new chip readers.