To fight fraud, credit card companies push more secure technology

More than one billion credit cards are in circulation in the United States, but just a fraction are like the ones being made at the CPI Card Group in Colorado.

They have a computer chip which stores user information. Unlike the magnetic strips on the back of most cards where personal information is permanently stored, the data on the chips is encrypted with codes that change whenever the card is scanned.

"Therefore, if fraudsters get a hold of cardholder data, they're not able to duplicate that data authentication that is dynamic and changes for every transaction," the company's CEO, Steve Montross, said.

The CPI Card Group in Colorado
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 Smart cards are widely used in Europe, Canada and Latin America. They are barely a blip in the United States where almost half of all credit-card fraud occurs.

"The chip is very different," said Tim Murphy of MasterCard. "It's like moving from an 8-track tape to an MP3 player."

MasterCard has teamed with Visa, Discover, American Express and others to try to make the technology standard in the United States. 

MasterCard and other companies want to make the more secure technology standard
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"It is costly to do," Murphy said. "It costs money for both merchants and for banks to issue the cards - and then to upgrade their terminals to take the cards. It's a little bit like thinking about if you wanted to redo all the entrance and exits to the interstate system in the U.S."

Smart cards are little used in the U.S.
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 The major credit card companies have decided to force the issue. In October 2015, businesses that do not accept smart cards and banks that do not issue them will be responsible for any fraudulent charges.

But this technology only protects in-store transactions, so criminals could shift their focus online.  It happened in England. After they switched to smart cards, the percentage of fraud committed online climbed from 23 percent to 65 percent.

  • Elaine Quijano
