Cash Now Looking to PIN System for Protection
The chip and PIN system
Managing cash now is taking on a new hi-tech face. The UK just announced a new “chip and PIN” system for credit cards. Currently when consumers use credit cards, they have to swipe its magnetic strip and sign a receipt. The new system has a card reader that scans a tiny chip that’s activated by a PIN, or personal identification number. Though the technology is available, the US is still hesitant to adopt the new chip and PIN.
The first reason the US is holding off on the new card system is the cost. The new technology comes along with a hefty price tag and companies are still doing the numbers in terms of ROI. The UK version is pricey, but they believe that the technology is worth the investment due to its added security features.
The cost of security
The main reason the UK developers worked with the new chip and PIN system for credit cards was to thwart criminals and credit card fraud. The magnetic strip of old cards is able to be duplicated. Criminals already have mock readers that they attach to various ATM machines that copy cards and note PIN numbers. When the criminal collects their readers, they can retrieve information and get directly into a consumer’s attached bank account. The chip and PIN system aims to make it much more difficult for thieves to attack information. It’s difficult (if not impossible) to duplicate the chip inside the new UK cards and without the PIN, there is no way to gain access to the account. The UK reported a decline in losses from credit card fraud by 218.8 million pounds in 2004 to 98.5 million pounds in 2009.
The current security system
The current method of checking out a customer includes swiping the magnetic strip on a card and then asking the customer to sign the electronic box at the check-out stand. Though retail outlets are supposed to ask for identification when any credit purchase is made over $25, studies have shown that rarely do they. Instead, they rely on a customer having a card-any card. That opens the door for fraud and theft that the new UK card developers claim they can stop.
Managing cash now for consumers and retailers is a top priority. Financial institutions are being courted for the new system because it cuts down on the amount of cash receipts. That means smaller processing costs for banks and retailers, and faster transactions. Faster transactions mean more purchases can be managed throughout a work day and that means more money for the business.
Currently banks are liable for purchases that are made fraudulently. If the customer can prove that they didn’t make a purchase, they can contact their credit card company and let them investigate. With the chip and PIN system, there is no longer a need for the liability to rest with the financial institution. The customer will be liable for any charge because that means the PIN was given out to the purchaser. Banks can claim that customers were negligent in protecting their PIN number and that alone makes them responsible for the charge.
The future of credit cards
Watching cash now is more important than ever as the economy is recovering from the recession. US financial institutions and retail outlets are still contemplating the change to the chip and PIN system of credit cards. Only time will tell if they make the investment to change their ways of operating.