For those of you who regularly travel you’ll have been noticing that more and more countries are adopting EMV chip technology. This is because EMV chips provide better security, this reduces the rate of credit card fraud which is better for consumers (less time spent fighting fraudulent charges) better for merchants (less product sold to fraudsters which they don’t receive any money on) and better for card processors (less cases of fraud to deal with from both a consumer and merchant perspective).
I’ve been in Australia recently for work commitments and have seen a lot of advertisements for the fact that they are moving to a chip & PIN only system. This means that if you don’t have a credit card with a EMV chip that allows you to enter a pin you will not be able to use it after August the 1st, 2014 in Australia. The change isn’t only for credit cards though, signature will no longer be an accepted form of verification for debit cards as well.
In total more than 800,000 merchant payment terminals will have a software update applied that means signature can no longer be accepted as verification. Previously cardholders would usually be prompted for their PIN, if no PIN was assigned to the card it was possible to hit enter which would then prompt the card holder to sign for the purchase.
This change is not government mandated, instead it’s being led by “The Industry Security Initiative” which is a collection of the major financial institutions and credit card processors in Australia (Visa, American Express, MasterCard & Diner’s. Discover doesn’t have a foothold in the Australian market).
Some Payments Will Won’t Require A PIN In Australia
Australia is also a big early adopter of contact-less payment methods (e.g just placing your card over the card reader). For contactless transactions (paywave & paypass) under $100 you’ll be able to use your card without entering a PIN. For almost all American card holders this doesn’t make a difference as contactless transactions are next to non-existent.
Our Thoughts
Thankfully this change is only supposed to affect cards that have been issued within Australia. If you have a card that has been issued overseas you’ll still be able to use the regular magnetic stripe and sign for your purchases. This means that this change won’t affect most of us in the US, although when travelling overseas you’ll need to start explaining more often why you need to sign instead of input a PIN. This is fine for countries such as Australia with a shared language, but when you start visiting other countries around the world it can be extremely difficult to get across that signing is still a valid form of authentication.
PIN & Chip technology dramatically reduces the amount of credit card fraud, it’s disappointing to see that the United States is one of the few countries dragging their feet when it comes to adopting this technology. Many people have wrongly assumed that EMV technology leads to less protection for consumers. This really isn’t the case, currently credit card companies will only not accept liability for fraudulent transactions on chip & PIN transactions if the PIN is able to be easily guessed (e.g 1234 or your date of birth) otherwise it’s afforded the same protections as a regular credit card transaction.
The main reason the US is behind the times is the sheer size of the market here. For example in the US there is 26.2 billion credit card transactions annually compared to five billion credit card transactions in the Australia. Big corporations prefer to use a smaller market size to test potential issues and pitfalls before moving programs to bigger markets. If the Australia and European market continues to see falling fraud rates expect the US to quickly follow suit. Another reason is that the American public are less open to credit card charges, contact-less payments were able to quickly gain traction in Australia whereas this has not been possible in the US. This is partly a cultral difference, but it’s also a difference in consumer credit laws that leaves Australians better protected than their American counterparts.
Hopefully this change in Australia encourages more card issuers in the US to start offering EMV chip and PIN as standard. It’s going to take a joint effort from all major financial institutions and card processors to educate consumers and merchants but with such a dramatic cut in the rate of fraud it’s surely worth the effort and monetary expense.
Tomorrow we will be posting a full list of credit cards currently available in the US that utilize EMV chip technology, whether they require a PIN or signature, their annual fee and also what the foreign currency exchange fee is. Make sure you stay subscribed for that post.
Hat tip to the PINwise advertisements
