At a press conference this week, the National Retail Federation called for widespread adoption of chip-and-PIN payment card technology by U.S. retailers and their partners.
“The chip validates that it’s the real card,” said Tom Litchford, VP retail technologies for NRF. “The PIN provides two levels of validation.”
Litchford said that while an encrypted microchip makes creating a counterfeit card impossible, the PIN number makes it much harder for a thief to impersonate a customer using a stolen card. Litchford and fellow panelists Mallor Duncan, senior VP and general counsel, NRF and David French, senior VP government relations, NRF, all agreed that only verifying a chip-enabled card with a customer’s signature does not go far enough to take advantage of the chip technology’s capabilities to prevent card fraud.
Whether the U.S, retail industry adopts chip and PIN or chip and signature, migrating to chip-based cards will not be cheap. Duncan estimated that switching to either form of chip-based card verification would cost the U.S. retail industry $20 billion to $30 billion during a period of several years. This includes costs of installing and upgrading hardware and software, as well as costs of the chip cards themselves, which run to a few dollars per individual card.
The NRF wants banks, acquirers, card issuers and other partners in issuing and accepting payment cards to share costs associated with migrating to chip-and PIN technology. Duncan said that while technically the acquiring merchant bank usually has to pay any costs associated with card fraud, the costs often wind up getting shifted back to retailers after the fact.
“Our goal is to start migrating right away,” Litchford said in urging retailers not to wait for the upcoming October 2015 shift in card fraud liability. At that point, any U.S. retailer that experiences card fraud relating to a customer using chip-based cards must assume any costs if they do not have equipment that can process chip-based card payments.
Looking ahead, Litchford said he expects that eventually, retailers will use contactless payment technology.
“We can easily provide contactless capability,” said Litchford. “Chip cards would also have an NFC chip. It’s ‘tap and go’ payment where you don’t swipe a card. It will probably migrate faster on mobile phones than cards. Isis, Visa and Square are all involved in contactless payment.”