Slideshow PINs Phase-Out

  • August 28 2011, 11:00pm EDT
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Signatures Not Secure

Merchants are supportive of a movement away from reliance on mag-stripes and signature authentications, and “are hopeful that Visa’s progressive announcement will begin a concerted move in that direction for the United States,” says Dodd Roberts, president of the Merchant Advisory Group, which counts the nation’s largest merchants among its members.

Terminal Investment

Hardware makers typically design payment terminals to last five to seven years, and a mass shift to chip-accepting terminals slightly more than four years from now will cause many merchants with newer hardware to incur unexpected expenses, says Dave Lott, senior vice president with Atlanta-based Speer & Associates.

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Merchant Resistance

Another reason retailers may balk at moving away from PINs is because many U.S. merchants recently have added new, tamper-resistant PIN-pad payment terminals, and making that technology obsolete in less than five years may spark resistance, suggests Dave Lott, senior vice president with Atlanta-based Speer & Associates.

Chips Prevent Fraud

Dynamic authentication provides more security for card transactions because, unlike magnetic stripe cards, each chip card transaction contains a unique or dynamic identifier that would block the biggest portion of point-of-sale card fraud, analysts agree.

Breach Target

Increasingly, “static” PINs and signatures, previously viewed as an additional layer of security, pose a security threat when they fall into criminals’ hands, enabling widespread card fraud, observers say. One such example is Michaels Stores Inc., which in May announced the discovery of a major debit PIN-pad breach that affected 90 payment terminals across 20 states where criminals stole debit card numbers plus PINs and extracted cash through ATMs from at least 100 customers’ bank accounts.

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Passing The Torch

Visa has set Oct. 1, 2015, as the date when liability will shift from issuers to merchant acquirers if fraud occurs in a transaction that could have been prevented with a chip-enabled payment terminal.

Chips Without PINs

With its series of incentives urging merchants to adopt EMV technology to accept contact and contactless chip cards, Visa is aiming to lay the groundwork for Near Field Communication-based mobile payment. But in a departure from every other global market that has switched to so-called chip-and-PIN cards, the plan does not call for implementing those chip transactions with PINs.

Mobile Future

Indeed, Visa has broad industry support for promoting mobile payments with its U.S. EMV chip card initiative, but it may be difficult to get card issuers and merchants to go along with its goal of ceasing to rely on signatures and PINs as primary methods of authenticating most point-of-sale card transactions, observers say.

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PINs Out?

Visa Inc.’s announcement that it expects old, static PINs to eventually be “eliminated entirely” in favor of dynamic authentication is facing resistance–in particular because many are not convinced that the PIN is past its prime.