EMV PIN and chip cards are predicted to cause an increase in online fraud

Following data breaches to major US retailers such as Target and Neiman Marcus, MasterCard, Visa and American Express are expediting the switch from traditional swipe and sign cards to EMV PIN and chip credit and debit cards.

The US is one of the remaining countries that have yet to make the switch to smarter EMV equipped cards. The deadline proposed by the major card firms for switching out the archaic cards is October 2015. Beginning October 2015, face-to-face retailers still using the swipe and sign charge procedure will be held 100% liable for claims of fraud or wrong doing. Following one of the largest payment data breaches in the US, Target has already begun the $100 million process of changing of out its current terminals to advanced EMV chip and PIN compliant charge stations.

The switch, which will help prevent physical data breaches and increase security for retailers, is expected to have the opposite effect on online Ecommerce transactions. Given it will not be possible for hackers and fraudsters to emulate in-store purchases with stolen card data and counterfeit cards, it is expected they will shift their concentration to online fraud.

"Fraud is much like natural phenomenon, whether that be the flow of water or electricity, in that it moves to the path of least resistance," said Al Pascual of Javelin Strategy & Research, a firm which focuses on the finance industry.

While there are payment services which require users to enter the card’s PIN number, given the chip cannot be provided upon checkout the information can easily be acquired along with the card number. Given time, the payment card industry, along with advances in technology could boost online security standards to implement chip and PIN transactions. Contactless transactions from supporting mobile devices and NFC enabled cards could be used with the new breed of NFC reader equipped PCs. Such technology is currently in its early stages of development and supports specific payment services and non-payment related NFC functions.

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