So, just what is this ‘chip-and-pin’ credit card system and why should I care? By the end of next year, your MasterCard and Visa will, most likely, no longer use magnetic stripes to share data with merchants. Instead, they will utilize the much-more-secure system that is the norm throughout Europe.
OK, so how does this ‘chip-and-pin’ system operate? It actually works a lot like your debit card; when you slide your card into the reader, NFC or RFID chips verify the legitimacy of the card. A keypad then appears where you enter your four-digit PIN (Personal Identification Number). For the transaction to go through, the PIN and the card both have to be verified as legitimate.
Why are the major credit card companies spending so much time and money switching to this new system? One word—fraud. According to an article on www.creditcards.org by Dan Seitz, credit card fraud costs about $2 billion a year in this country alone. Of course, the chip-and-pin system will not prevent online credit card fraud. However, the new system has been shown to substantially reduce “face to face” fraud, where someone can copy down your card information when you relinquish it at a restaurant, gas station or any business where you do not actually see the transaction take place. It also is shown to make it more difficult for thieves to use so-called ‘skimmer devices’ that fit over a credit card slot and copy the magnetic stripe, allowing them to “clone” your card.
Second word–competition. Visa and MasterCard, the giants of the bank card world, are looking to retain that position. This is no easy task, with such high-tech rivals as Google Wallet, Square andPayPal in the fray. Add in cell phone companies that are attempting to totally bypass any sort of direct- contact payment and you have major competition for cashless payment.
Although there will likely be some hiccups as the transition is made from magnetic card readers to the new ‘chip and pin’ system, the conversion should be relatively smooth. If it helps prevent credit card fraud, it will be well worth the change.
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