NEW YORK (TheStreet) -- Counterfeiting of bank-issued credit and debit cards is likely to fall precipitously during the next few years in the U.S.
By next October, most bank card issuers will have swapped out their payment cards for new ones that carry embedded microprocessor chips. The chips work to curtail card fraudsters' attempts to steal information during in-store transactions on point-of-sale terminals. Meanwhile, Apple (AAPL) recently released its own technology platform for mobile payments, called Apple Pay, which enables iPhone 6 customers to use their devices to make secure, electronic transactions with many bank-issued cards.
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"Both payment systems will provide customers with a geometric jump in security against any card fraudster, including counterfeiters, who seeks access to personal information carried on payment cards during the card payment process," said Nick Holland, a senior analyst who leads the retail payments practice at Javelin Strategy, an industry research practice.
EMV is an industry group that was established by MasterCard (MA) , Visa (V) and Europay in 1996 to develop a standard for embedded chip-card technology that would ensure global interoperability. Outside the U.S. the EMV standard has been well established and has proven to be effective in reducing counterfeit card fraud in more than 130 countries. For example, the United Kingdom experienced a 60% reduction in counterfeit card fraud from 2003 to 2013.
"We know from experience in other countries, where EMV-compliant chip technology is fully adopted, it makes a big impact in reducing counterfeit fraud," Stephanie Ericksen, vice president of risk products at Visa, told TheStreet.com.
Adoption of EMV-compliant chip technology has lagged in the U.S., however, and so major payment networks such as American Express (AXP) , Discover (DFS) , MasterCard and Visa have developed a "carrot and stick" plan to accelerate deployment. They each independently set an October 2015 deadline for retailers to upgrade their payment terminals and for bank card issuers to become EMV-compliant. At that time, whoever has the weaker technology will have to assume the liability for any fraud that occurs.