As our country begins to progress towards chip cards, are you as a consumer or business owner prepared and informed on changes they will bring about? Here is a quick guide on protecting yourself against any fraud that you may encounter as these chip cards become more common.
Chip Card Basics
Chip cards are actually called EMV cards, which stands for Europay, Mastercard and Visa. Approximately 120 million Americans have already been issued a chip card. By the end of 2015, around 70% of consumers will be using these cards. Chip cards, however, are not a new technology, and this technology has been growing over the past 20 years. Most of the world has been using these cards over the last few years, including Canada, Mexico and the United Kingdom, so you’ll have no trouble using these cards in other countries. The cards are standard size and include a small, metallic chip on the front of the card. Gone are the magnetic strips that held sensitive consumer data, which counterfeiters were able to access, leading to major data breaches. Unlike magnetic strip cards, every time the new chip cards are used for payment, the card chip creates its own unique transaction code that cannot be replicated or used again. This means the data is constantly changing, which makes it very hard for counterfeiters to replicate. Data breaches like the massive breach Target experienced in 2013 can still occur but hackers will have a very hard time replicating any credit card data coming from chip cards.
As a consumer, the main difference you will notice is you dip the card, rather than swipe it. Once you dip it, data begins to flow between the chip card and your bank. This can take slightly longer than when you swipe a magnetic card.
Chip Cards and Small Businesses
Although chip cards will lead to increased financial security, criminals do work very hard to overcome any safety measures put into place. Among the most vulnerable? Small businesses.
Small businesses are most vulnerable because many can't afford the expensive software used to quickly determine whether transactions are fraudulent. Many may not see the point in switching and don’t want to shoulder the cost. But as of October 1st, business owners will be 100% financially responsible for any chip card fraud that happens due to fraud originating in their store. Basically, if chip card fraud happens at your place of business, and you don’t have upgraded terminals, you will be held financially responsible. Also, if your company exceeds a set limit on fraudulent transactions — usually 1% of your total transactions — you may be barred from accepting credit cards. However, if your business has upgraded security, the bank will reimburse the customer, just as they do with magnetic cards.
Small businesses will pay somewhere between $150 and $600 for each new payment terminal, industry officials say, though mobile readers can be had for less than $100. Square has an affordable, mobile chip card reader that will offer protection to even the smallest of businesses.
Chip Cards and Online Fraud
Most experts are predicting a major increase in online credit card fraud, with some saying online fraud may increase to $19 billion by 2018. In the United Kingdom, online fraud -- also known as "card not present," or CNP, fraud -- rose 79 percent in the first three years after the country switched to chip cards, and it more than doubled in Australia and Canada! But it makes sense - the harder it is to counterfeit data from chip cards, the more criminals will turn to card not present transactions.
As a small business owner, extra time and care should be spent verifying online orders. If a sale seems questionable, you should take time to investigate. It will be more important than ever to require users to create accounts, and to monitor what the customer normally purchases. Implementing a 3D Secure system, such as Verified by Visa, MasterCard SecureCode and American Express SafeKey, can add another layer of protection.
As a consumer, you are also protected by registering with a 3D Secure System. Make unique passwords for every account, and make sure none of your passwords are the same between accounts. If you have the same password for your social media, bank account, PayPal and Verified by Visa, it will make it very easy for hackers to access your accounts. It’s also important to make sure anti-virus software is up to date. Monitor your bank account and credit card statements carefully - and report any unusual activity immediately.
Those who make their living off stealing others’ data will not give up easily, and may ramp up their efforts as the new system is rolled out. Though we will be protected in new ways, we will also be compromised in new ways. It is important that business owners and consumers both stay aware to any unusual transactions, and take immediate action is any fraud occurs.