The deadline of Oct 1, 2015 has long past, and while many consumers have seen their old magnetic stripe cards replaced with the more secure and chip cards, many retailers are still not equipped to accept them or willing to do so.
The outdated magnetic-stripe system should be replaced by the so-called EMV (Europay, MasterCard and Visa) chip technology widely used throughout Europe by the end fo 2016. But progress is slow. How slow?
CardHub‘s new survey finds that 42 percent of retailers have not updated the terminals in any of their stores.
The retailers’ response, compared to the actions of issuers getting chip cards out to customers, has been “shockingly muted,” CardHub writes.
And this could be a big problem for merchants that do not implement EMV-compliant payment terminals and are now liable for fraudulent purchases made in their stores. About $8 billion in fraudulent card purchases are made in the U.S. each year and that “certainly represents a mountain of risk for resistant retailers,” says CardHub.
Why are chip cards more secure? When you pay for a purchase with your magnetic stripe card, the complete card number (the same one that is on the card) is used to complete the payment without encryption — meaning any machine that can read a magnetic stripe can pick it up.
But with chip-based cards, that transaction is strongly encrypted and also assigned a one-time code that is no longer valid after the payment is received (unless you need to make a return). This process is what makes chip card numbers much hard to hack into — by using point-of-sale (POS) skimmers or any other tactic — since the information on the chip is constantly changing.
More key findings from CardHub that reflects a disconnect among credit card holders as well when it comes to the advantages of a chip card:
- 43% of retailers that have experienced data breaches in the past 5 years have not updated their point of sale terminals.
- 56% of people don’t care if a retailer’s payment terminal is chip-enabled.
- 41% of people say they don’t have (or don’t know if they have) a smart-chip credit card.
- 62% of people don’t understand the difference between major card security standards.
- 41% of people falsely believe debit cards protect them from fraud better than credit cards.