For Prepaid Cards, Go The EMV Chip Route When You Can

Feb 7 2014, 7:12pm CST | by

Besides the thieves themselves, the main culprit to emerge from the recent heist of personal information from over 100 million Target and Neiman Marcus shoppers isn’t human at all. Rather, the unlikely villain is a decades old piece of technology known simply as the magstripe, or magnetic stripe, that graces the backs of billions of credit, debit and prepaid debit cards carried by Americans in their pocketbooks and wallets everyday.  But, there is an alternative on the way, the EMV chip card.

In a way that not even the most well-crafted editorials or investigative journalism series could have accomplished, the collective anger spawned by millions of consumers has focused a spotlight on the inability of magnetic stripe technology to safeguard the critical account and personal data it contains. “Basically, the magnetic strip contains all the data needed for credit card fraud,” says Lamar Bailey, Director of Security Research for Tripwire, a data security firm that works with companies like Visa, MasterCard and Safeway. “Unfortunately, these strips are very easy to read and duplicate and are a favorite target for a wide variety of financial fraud.”

As difficult as the lesson has been to learn, there is now a more widespread understanding of the need to quickly embrace so-called smart cards. Also known as EMV or chip and PIN cards, they have been the standard in Europe for years and offer far greater identity protection than magnetic strips.

Introduced in the 1990s in Europe, these so-called EMV cards take their name from Europay/MasterCard/Visa. As Robert Siciliano, the CEO of IDTheftSecurity.com, explains it, EMV chip cards contain an embedded microchip that is authenticated using a personal identification number, or PIN. “When a customer uses a smart card to make a purchase, the card is placed into a PIN pad terminal or a modified swipe-card reader, which accesses the card’s microchip and verifies the card’s authenticity. The customer then enters a four digit PIN, which is checked against the PIN stored on the card.”

This is another way of saying that smart cards are a tougher nut for identity thieves to crack – and a good explanation as to why global cyber criminals have set their sights on the U.S. It also means that, whenever possible, American consumers should choose a payment card that offers EMV chip protection. This is particularly true for the growing number of Americans who utilize prepaid debit cards.

While it’s true that the prepaid debit card industry has been exploding recently – Mercator Advisory Groups reports that Americans loaded $192 billion onto prepaid cards in 2012 – the mainstreaming of a product once favored primarily by those who couldn’t get bank accounts or credit cards has not yet been accompanied by stronger consumer protections. For instance, if a credit card is lost or stolen, federal law limits consumer liability to just $50, although most major card issuers offer zero liability. Federal law also protects debit cards, although limiting liability depends on a consumer quickly reporting a card lost or stolen. By sharp contrast, prepaid debit cards do not have blanket protection. The terms and conditions vary depending on the card issuer, with some being quite good and others nonexistent.

Because of that lack of protection, prepaid debit card users concerned about fraud can avoid having their accounts cleaned out by getting an EMV chip card. Unfortunately, these smart cards are not available everywhere – not even close. Some card issuers, such as the Members 1 st Federal Credit Union, do offer EMV chip reloadable prepaid cards. But as is the case with most debit and credit cards, a smart card option is not yet available. “EMV has not been popular in the US because of the high cost of replacing all the credit card readers and millions of credit cards,” says Lamar Bailey of Tripwire.

What can change that? For many credit and debit card issuers, the change is underway and expected to be complete by 2017. A combination of public pressure, regulation and simple self-interest could prompt the same move by prepaid card providers. “The technology in a magnetic stripe card has been hacked and decimated,” says Siciliano of IDTheftSecurity.com. “EMV for prepaid cards would bring them to the same security standard as credit and debit cards and more than likely open up a new market for card providers.”

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Japanese government concerned by yen's rapid fall against dollar
Tokyo, Nov 21 (IANS/EFE) Japanese Finance Minister Taro Aso Friday expressed concern over the sharp depreciation of the yen against the dollar this week, and said abrupt movements in the foreign exchange market were not beneficial to the Japanese economy.
 
 
WHO declares DRC Ebola-free
Geneva, Nov 21 (IANS) The World Health Organisation (WHO) Friday declared the end of the Ebola outbreak in the Democratic Republic of Congo (DRC).
 
 
Ultra rich population getting richer: Study
Washington, Nov 21 (IANS) Only 0.004 percent of the world's high networth adult population controls almost 13 percent of the world's total wealth, according to a new study.
 
 
Morocco, US organisation sign MoU on 'Enterprise City' project
Marrakech, Nov 21 (IANS) The Moroccan government and US institution Babson Global have signed a memorandum of understanding to conduct a feasibility study for the establishment of an "Enterprise City", a city dedicated to business, in the North African country.
 
 
 

Latest from the Network

Chinese court upholds life sentence against Uyghur activist
Beijing, Nov 21 (IANS/EFE) A court in western China has upheld the conviction and life sentence handed down against Uyghur activist Ilham Tohti, who appealed the sentence when it was first passed in September, one of...
Read more on Politics Balla
 
Matt Smith to star in Patient Zero
Matt Smith has been cast in 'Patient Zero'. The former 'Doctor Who' star has signed on to appear in the infection film which will see him have to cope with the aftermath of a worldwide viral pandemic across the Earth....
Read more on Movie Balla
 
Mick Jagger praises 'amazing' Chadwick Boseman
Sir Mick Jagger claims Chadwick Boseman is ''amazing'' as James Brown in the singer's biopic 'Get On Up'. The 71-year-old Rolling Stones rocker co-produced the movie and praised the young actor for his portrayal of the...
Read more on Movie Balla
 
South African president calls for end to racism in sports
Johannesburg, Nov 21 (IANS) South African President Jacob Zuma Friday called for global efforts to end racism in sports. South Africa adds its voice to the billions of others throughout the world who are determined to...
Read more on Sport Balla
 
Sheamus wants reality show for WWE Superstars
Sheamus wants to appear in a reality TV show about the WWE Superstars. The 36-year-old star believes the success of E! series 'Total Divas', which follows the lives of the female competitors in the company, has shown...
Read more on Celebrity Balla
 
Bill Murray: Actors are heroes
Bill Murray thinks actors are heroes. The 'Ghostbusters' star - who recently had an entire day dedicated to him at Toronto Film Festival - claims people admire actors so much because they get to escape reality by...
Read more on Celebrity Balla
 
Robin Williams' son: We're doing OK
Robin Williams' son says the late star's family are still adapting ''to the new normal'' following his father's death. The Hollywood actor died from asphyxia due to hanging at his home in August aged 63 and his eldest...
Read more on Celebrity Balla
 
Jennifer Lopez exfoliates with diamonds
Jennifer Lopez exfoliates her legs with diamonds. The 'On the Floor' hitmaker reportedly swears by a $250 Australian-made body scrub that is made with ''diamond powder'' to keep cellulite at bay. A source close to the...
Read more on Celebrity Balla
 
Indian golfers Atwal, Rashid tied 15th in Manila Masters
Manila, Nov 21 (IANS) Indian golfers Arjun Atwal and Rashid Khan shared the 15th position after the second round of the $1 million Manila Masters at the par-72 Manila Southwoods Golf and Country Club here Friday....
Read more on Sport Balla
 
Sarjubala, Saweety enter women's World boxing semis
Jeju (South Korea), Nov 21 (IANS) Indian boxers Shamjetsabam Sarjubala and Saweety reached the semi-finals of the Women's World Championships here Friday. Sarjubala started the proceedings with a dominating 3:0 win...
Read more on Sport Balla