When will Chip and PIN introduced in the USA? While other countries moving ahead in fraud prevention, the USA remains locked into a 30 year old technology.
The main data storage on payment cards was the magnetic stripe, developed 30 years ago with limited memory and no support of cryptography. With easy access to the data stored on magnetic stripes, organized criminal groups could replicate them in blank cards, and then use these counterfeit cards to shop or even withdraw cash from ATMs.
In Latin America, Brazil was one of the first to switch to chip and PIN in 2007. While initially there were barriers, such as the cost to adapt POS devices and ATMs, almost 100% of card transactions were converted in less than two years.
The benefits became evident in a matter of years. While the number of debit and credit card transactions nearly doubled during 2007-2011, card fraud losses dropped by US$ 9 million. These days, counterfeit card fraud in Brazil is practically nonexistent. And of course, better fraud protection can improve the image of issuers by their customers.
Mexico is also well on its way to implementing chip and PIN, and starting to reap the benefits. But these benefits, while impressive, are by no means a justification to rest on our laurels. Indeed in Mexico, Brazil and elsewhere, we are seeing increases in other fraud types, such as cross-border fraud.
Source: FICO Banking Analytics Blog
