NEW YORK ( MainStreet) - October 1 is here, and for bank card users, it's time to use your financial institution's so called " chip" cards.
The new, high-tech generation of EMV cards -- which take their name from Europay/MasterCard/Visa -- contain an embedded microchip that is authenticated using a personal identification number or a signature. A reader detects the chip and asks the card user for a PIN that matches the one found on the chip or, in a less secure scenario, a signature. Since there isn't a magnetic stripe with all a user's data embedded involved in the transaction, there's a far lesser chance of a chip-and-PIN user's data being stolen.
The key component in the EMV switch is its additional liability terms for retailers who have not make the terminal switch by October 1. Back in 2011, Visa, MasterCard, Discover, American Express and their banking partners agreed on a October 1, 2015, " liability shift" that, for the first time, would make merchants liable for any fraudulent charges that result from using point-of-service readers that can't read chip-enabled cards. Despite the new, dire stakes for retailers and continued liability for card issuers who can't get chip cards to their customers in time, nobody's been treating that October 1 date like a deadline.
But there's a lot of confusion about the new card and the new protections the individual consumer will be afforded.
Here we've rounded up the best of our MainStreet EMV coverage to provide you with the answers to your most burning questions?
How prepared are we?
According to the Payments Security Task Force -- an industry group formed in 2014 to push new payment technology, with members including American Express, Bank of America, Capital One, Chase, Citi, Discover, First Data, MasterCard, US Bank (Elavon), Visa and Wells Fargo -- 63% of credit and debit cards will be chip-enabled by the end of 2015, while 47% of all merchant terminals will be able to read those cards (as a point of reference, the EMV adoption rate for merchant terminals in the U.S. at the end of 2014 was 7.3%).
Is the liability shift just retail stores or anywhere I use a card?
The liability shift for fuel pumps and ATMs to accept chip-enabled cards isn't until October 2017, largely because of the expense and difficulty involved with upgrading that equipment.
Dick Mitchell, solutions director at Randstad Technologies, notes that magnetic stripes will endure in a widespread fashion until gas stations are forced to convert to EMV card readers in October 2017.
The risks involved with EMV cards in the U.S. center on the difference between chip-and-PIN cards compared to chip-and-signature signature ones, according to Robert Siciliano, personal security and identity theft expert speaker with TheBestCompanys.com. Whereas chip-and-PIN cards allow for a safe contactless transaction and transfer of encrypted data, a chip-and-signature card requires the consumer to sign his signature physically. The problem with chip-and-signature, Siciliano said, is that a signature can be forged and the card can be intercepted prior to transaction completion.
"Chip-and-PIN technology is better than chip-and-signature," he said." However, the chip-and-signature is taking a much stronger root in America than the PIN version. The signature version's most obvious drawback is that it's useless in all the other nations where PIN technology rules."
Siciliano says it will cost an arm and a leg to implement chip-and-PIN on a universal scale, and unfortunately, funds are already being diverted to switch over to the signature technology rather than the chip.
The chip-enabled payment technology in the U.S. still won't resemble the global technology that inspired it. Used in Europe since the early 1990s, EMV cards contain an embedded microchip that is authenticated using a personal identification number. A reader detects the chip and asks the card user for a PIN that matches the one found on the chip. However, the U.S. version of this technology has been chip-and-signature, which foregoes a pin for a cardholder's signature or abandons authentication altogether for transactions below a certain amount.
Matt Schulz, senior credit card industry analyst for CreditCards.com, notes that chip and signature is still a major step forward for credit card security in the U.S. However, he is disappointed that issuers are stopping there.
"Simply put, chip-and-PIN cards are more secure, because it's easier to forge someone's signature than to know their PIN," he says. "And I do understand banks' reluctance to add another layer of change into transition by adding a PIN, but the truth is that Americans are already accustomed to using PINs. Everyone already uses them with their debit card, so adding them on to a credit card purchase wouldn't exactly be taking people into uncharted waters."