With the Target security breach still haunting tens of thousands of consumers and lenders, a new focus on debit and credit card protection is washing over the country.
American lenders have been eyeballing Europay, MasterCard and Visa (EMV) credit and debit card technology for some time, however the recent problem at Target has a number of card issuers stepping up research and possibly implementation.
Anyone who has traveled abroad may be familiar with “chip” or EMV credit and debit cards, already in full issuance throughout Europe and other factions of the world. Generally speaking, these “chip” cards is an added component of technology that provides an additional layer of protection from fraud.
Bankrate.com described what this technology and provided a general idea of how it works: EMV-enabled cards, named for developers Europay, MasterCard and Visa, have an embedded microprocessor chip that encrypts transaction data differently for each purchase. Some chip cards require a personal identification number to complete a transaction, while others only require a signature. EMV is widely used in Europe and Asia and is steadily being adopted as the standard type of credit card worldwide. Everywhere, that is, except the U.S.
Because each card is unique, fraudsters will have an extremely difficult time retrieving payment data components or skimming the card. Compared to the traditional U.S. card where data remains static and unchanged, the EMV enabled cards present specific security advantages.
Will EMV Impede Fraud?
While the Target breach prompted a renewed interest in EMV cards, some claim that the chip would not have prevented what happened. “EMV would not have prevented the breach,” Randy Vanderhoof, executive director of the Smart Card Alliance told Forbes, “but it would have made the company a less likely target for a data breach if the data stored in their system were less valuable to criminals.”
That being said, Chris McWilton, president of North American markets at MasterCard submitted an opinion piece to CNBC News saying that EMV could still be a positive component in the regaining the public’s trust.
"This migration is about an upgrade that will drive both innovation and security for all parties, most importantly for consumers and cardholders," he wrote. "For too many years, different parties have relegated the EMV migration decision to a cost vs. benefits spreadsheet analysis. However, spreadsheets don't consider the cost of losing the public trust, which is immeasurable."
Credit Union Lenders Ready to Provide Chip Cards
As the industry mulls over whether introducing EMV cards is viable, some lenders have already begun to offer them. For example, Firefighters Community Credit Union ($200 million, Cleveland, OH) is adding EMV technology to its newly refreshed credit card line.
Ben Laurendeau, president and CEO tells Credit Unions Online that chip integration came with an entire plastic re-vamp. “It was about modernizing our program and bringing what seemed to be an antiquated offering to something that met our members’ wants and needs.”
He says that adding the EMV security chip was actually the card processor’s idea. “When we told them about the mass re-issuance, they suggested adding EMV as part of our fresh start.”
Ironically, new Firefighters Community Credit Union card production started before the Target security rift, however because so many lenders are now having to re-issue cards, the rollout had to be pushed back. “All members will receive EMV cards on or around 5/1/14. It was originally scheduled for 4/1/14 but had to be pushed back due to the high demand across the industry for credit card issuance due to the Target breach.”
Laurendeau says that like Vanderhoof, EMV won’t completely eradicate fraud but will make criminals’ jobs a little harder. “I can’t say with confidence that a fraudster still couldn’t breach a merchant database in the EMV environment. EMV would however limit the fraudsters ability to create counterfeit cards for ‘card present’ transactions.”
As Firefighters anticipates rollout, State Department Federal Credit Union ($1.5 billion, Alexandria, VA) has offered EMV cards since 2012. “July of 2012 is when we officially began issuing the EMV chip card exclusively on all new accounts and as replacement cards,” says Carrie Shaffer, marketing manager. “As of July of 2013 is when we started replacing all expiring cards with the EMV chip. So currently all cards we issue are the EMV VISA Platinum Credit Card.”
Shaeffer says while there are no specific drawbacks to offering the additional layer of security, she says that because the technology has not been fully integrated into U.S. plastic, the chip component may not be fully utilized. “It’s not necessarily a drawback from a usage standpoint as EMV cards have the traditional magnetic stripe, but the EMV chip technology has not yet made its way to about 99% of U.S. Merchants. So that specific feature isn’t utilized if you swipe.”