Chip-Embedded Credit Cards – What You Need to Know

One of the most recent trends in the retail world is the implementation of chip-embedded credit cards. Those credit cards were developed and are being employed all in the name of safety. Safety is, absolutely, a top priority, especially with large-scale security breaches like Target’s still fresh in the minds of most.

Here’s the irony: Visa and MasterCard are now under fire for the apparent lack of safety provided by those very cards. Largely, because the cards require signature authorization, instead of PIN numbers. Signatures are notoriously easy to forge, especially under the untrained eye of cashiers. Because of this, major retailer Home Depot is suing MasterCard and Visa.

According to Home Depot, “Visa and MasterCard have pushed consumers to use payment card technology that Visa and MasterCard know is defective and subject to fraud and have colluded with each other and with the banks that issue debit and credit cards to do so.”

The United States is unique in its lack of implementation of the chip-and-PIN system, which requires you to have the card, and knowledge of it (PIN). This works out when card readers are down. However, it’s also been proven to be a riskier business. Because of this, the lawsuit notes the fact that retailers face higher fees because the Interchange Fee on signature transactions is notably higher than on PIN transactions. Higher fees, and higher rates of fraud is certainly a lose-lose situation.

In 2014, Home Depot was hacked, and 53 million customer email addresses were stolen. The store has, unfortunately, experienced the kind of breach that would prompt an assessment of all types of risk. The question however, is whether or not either of the major credit card companies will respond in a manner that is desirable to Home Depot. Whatever the verdict, it will be an interesting one. Especially as more and more businesses, large and small, implement readers designed to read chip-embedded cards.

We are committed to following trends that affect our customers – large or small. Check back for further updates on how chip-embedded credit cards might affect you and your business!