Discover Chairman and CEO David Nelms recently announced that Discover would be transiting from chip + signature to chip + PIN during the Electronic Transactions Association’s TRANSACT 16 meeting in Las Vegas. From a consumers stand point this means that when they make a purchase they will be required to insert their chipped card into the payment terminal and then enter a PIN code, rather than signing their name.
Credit card issuers and merchants have been pushing the transition to chipped cards due to the liability shift that occurred in October of last year, because of the October liability shift last year. The liability shift can be simply explained as follows:
[T]he party that is the cause of a chip-on-chip transaction not occurring (i.e., either the issuer or the merchant’s acquirer) will be financially liable for any resulting card-present counterfeit fraud
losses. – Visa
There are significant advantages to using a PIN over a signature though. For starters consumers are able to use their chip + PIN cards in countries where this is the standard (they are able to sign for these transactions as well, but this can be difficult to explain to cashiers in countries where chip + PIN is the standard. Signature transactions also won’t work for automated kiosks at places like train stations). EMV + PIN also reduces the amount of fraud. According to this white paper total fraud losses on signature based transactions per dollar volume were .13 percent or 13 basis points. PIN-based transactions .035 percent or 3.5 basis points.
One thing that consumers should be aware of is how their zero liability protection works. Typically if an unauthorized transaction is made on your credit card, you’re not responsible for this transaction and will have it refunded. In some cases PIN transactions are specifically excluded from this zero liability protection, as far as I can see all of the major payment networks (Visa, Mastercard, Discover, American Express) no longer exclude PIN transactions, but this could be different at the card issuer level. Zero liability will also not cover you if you haven’t exercised care to safeguard your card and PIN (e.g if your PIN is 0000 or 1234 you usually will not be covered).
Barclaycard is currently the only major credit card issuer that offers chip + PIN cards as standard. At the moment Discover have not released a timeline for their switch to PIN cards. What are your thoughts about the changes? Are you a fan of chip + PIN or is it just one more number to forget?
