A change is coming to the checkout at your local retailer. This fall, retailers all over Maine and across the country are swapping out old payment terminals in favor of machines that accept new “chip” credit cards. Unlike their predecessors, these cards will contain a microchip that will make it more difficult for hackers and thieves to counterfeit. About one in six cards issued by banks and credit unions has already been replaced, according to the Electronic Transaction Association.
Retailers understand the importance of payment security and have invested about $8 billion to upgrade their terminals to accept these new cards. However, the new cards being issued to consumers still contain a serious security flaw — they continue to rely on signature for authentication, instead of a personalized, four-digit PIN. Entering a four-digit PIN has been shown to make debit transactions 700 percent more secure, according to the Federal Reserve, and it is used in Europe, Canada and the rest of the industrialized world to combat fraud.
If a thief or hacker steals your credit card but doesn’t know your PIN, that credit card becomes rather worthless. Adding a PIN to transactions makes credit and debit information less valuable to thieves, and it’s why it has become a global standard over the past decade — everywhere but the United States.
To the bewilderment of merchants, banks and card issuers in America are only issuing “chip and signature” cards, a card more prone to fraud and theft. About 50 percent of card fraud in the world happens in this country. We are clearly the favorite target of overseas hackers and unfriendly governments. The United States can’t afford to be lagging other industrialized nations with the weakest payment system in the world. We should have the strongest.
Some banking executives have cynically suggested that consumers might have difficulty using their credit cards if they need to remember a four-digit PIN. This sort of disingenuous babble would almost be funny if it wasn’t insulting. Cards enabled with chip and PIN technology require the same type of four-digit code that is used at an ATM or when you unlock your iPhone. Consumers are quite adept at remembering a security code, and it makes no sense for local banks and credit unions to suggest otherwise. This is a bottom line issue for banks, and it seems they’re willing to accept greater fraud rates if it means spending less on a more secure system.
Consumers in Maine and across the rest of the nation deserve better from our financial system. At a minimum, we should be providing our customers with the same security measures and protections afforded those in Europe and Canada.
Curtis Picard is the executive director of the Retail Association of Maine.