NEW YORK (TheStreet) — Banks are spending billions each year to reimburse consumers whose accounts were breached by cyber-thieves. To change that, they are replacing the dated, 50-year-old magnetic strip card with so-called chip-based credit cards that are better equipped to store card data safely.
The change could have real-world consequences to U.S. credit and debit card users, who suffer about half of all credit card fraud even though Americans make up a quarter of all global credit card transactions, according to Barclays.
Changing to chip-based cards means a new shopping experience for consumers.
For starters, they will have to "dip the chip," says Loc Nguyen, chief marketing officer at Feedzai, a fraud protection services company. "Americans will have to learn a new checkout behavior," Nguyen says. "Magstripe cards are swiped and immediately put back into wallet. On the other hand, chip cards must remain in contact inside card readers while the chip information is accessed and updated. Shoppers will have to dip the chip and leave it – pulling the card out too early is like disconnecting a USB device too early."
That may seem trivial, but generations of shoppers and store clerks have grown accustomed to swiping, Nguyen says, and early implementations of chip cards in the U.S. in the early 2000s revealed that changing behavior takes some time. "Expect some delays at checkout lines as clerks educate cardholders," Nguyen says.
Nguyen says it will also be harder to buy products and services online: "As EMV makes it harder for fraudsters to counterfeit cards for use in physical store environments, frustrated fraudsters will move online where there are no chip readers that can utilize the sophisticated security features of the chip," he says. As a result, some merchants may get hit with increased fraud and compensate by performing additional security checks, such as calling customers to verify large orders or requiring additional verification data. "Thus good customers can be penalized with extra scrutiny when buying online because fraudsters behave badly," Nguyen says.