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 But they are being resisted by the banking industry, which sees no
need to invest further in PIN technology, already used with debit
cards, resulting in halting adoption and widespread confusion.
A small band of retailers with the clout to call the shots on their
branded credit cards is leading the charge. Target Corp is moving
ahead with a chip-and-PIN rollout, and Wal-Mart Stores Inc plans to
do the same.
But Wal-Mart said it faces obstacles because its credit card
partner, Synchrony Financial, is not yet able to handle PINs on
credit cards. Synchrony declined comment.
Broadly, U.S. banks are unprepared or resisting the change.
The impasse comes after many consumers got their hands on new credit
cards embedded with so-called EMV chips in advance of an Oct. 1
deadline that required retailers to accept chip cards or be liable
for fraud losses. EMV stands for EuroPay, MasterCard and Visa.
But only about a third of merchants are actually using the chip
technology, according to analyst estimates. The number may not pick
up until early next year, if at all, because the retail industry
typically halts upgrades during the crucial holiday shopping season.
“PIN issuance will remain a niche,” said Julie Conroy, credit-card
analyst with Aite Group.
Banks favor using chip cards verified by old-school signatures, even
though chip-and-PIN usage has led to lower fraud over the decade
they have been used in Europe and elsewhere.
“The PIN is definitely a must," said Lance James, chief scientist
with cyber intelligence firm Flashpoint. "It’s one extra step that
provides true two-factor authentication."
But bankers say PINs provide little benefit beyond the advantage of
using chips in combating the estimated $7 billion-plus in annual
U.S. card fraud.
EMV chips thwart criminals who use stolen data to create counterfeit
cards, a category that Aite estimates accounts for 37 percent of
that fraud. Banks say that PINs only provide additional fraud
protection when criminals seek to use lost or stolen cards, a
situation that Aite estimates accounts for only 14 percent of fraud.
Banking groups say there are better approaches than PINs for
verifying customers and have asked retailers to embrace tokenization
and encryption to prevent theft of credit card numbers.
“PIN is a static data element that would not have a meaningful
impact on overall payments fraud,” said Electronic Payments
Coalition spokesman Sam Fabens.
PINs are also expensive to implement. Gartner analyst Avivah Litan
estimates that banks would have to invest hundreds of millions of
dollars in network improvements to support them.
Most retailers have yet to begin using any form of chip technology
on credit cards, instead relying on the magnetic strips that are
still part of the new cards, even though it now puts them on the
hook for fraud losses.
But some are pushing recalcitrant banks, arguing that it is absurd
to require them to spend billions of dollars to upgrade their
point-of-sale terminals if they are not going to get the added
security of chip-and-PIN technology.
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“If they really cared about security, it would be a no-brainer,” to
use PINs, said National Retail Federation General Counsel Mallory
Duncan.
CONFUSION REIGNS
The issue has caused some confusion, even among experts.
A Chase credit card representative this month wrongly tweeted that
the firm would soon issue chip and PIN credit cards. A company
spokeswoman later said the tweet was a mistake.
The U.S. Federal Bureau of Investigation this month released a
public service announcement incorrectly suggesting that all EMV
credit cards use PINs, saying “Consumers should use the PIN, instead
of a signature, to verify the transaction.” The agency updated the
announcement to remove the error.
So far only one PIN credit card is available through a major U.S.
retailer, a MasterCard that Target issues through Toronto Dominion
Bank.
Target spokeswoman Molly Snyder said her company recently began
distributing PIN cards through a rollout that should be completed in
the spring.
“We believe that it is the most secure form of payment that is
currently available,” Snyder said.
Even though demands for PIN cards are being made by groups
representing large retailers, some big merchants say they have no
plans to offer PINs.
“Our approach is chip and signature,” said Macy's Inc spokesman Jim
Sluzewski.
JC Penney Co Inc said it has no plans to introduce PINs and has yet
to begin processing any chip transactions.
An industry executive said that some retailers have privately
confided that they fear widespread PIN adoption could result in
slower lines and lost sales from shoppers who forget PINs.
“They don’t want PINs because it clogs up transactions,” said the
executive who declined to be named because the discussions were
private.
(Reporting by Jim Finkle; Additional reporting by Sruthi
Ramakrishnan, John Tilak and David Henry; Editing by Jonathan Weber
and Bill Rigby)
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