Skimmers are gaining ground, so it's time for a change

CANADIANS have long been among the world's biggest users of debit and credit cards and that's directly attributable to their trust of magnetic stripe technology and its ability to store data and match cardholders up with their accounts. But card skimmers are gaining the upper hand. By attaching an illegal device to an ATM or an automated ticket counter, crooks are able to capture private debit card data, like PINs, from the mag stripe and make duplicate cards. Then they empty out the account or go on wild shopping sprees. Now debit and credit card issuers are about to fight back with the pending launch of chip cards. The new technology heralds a new era in payment security as the data on the chip can't be captured like the information on the mag stripe can be. Chip cards carry heavy encryption codes that can be enhanced over time to stay at least one step ahead of would-be thieves. Kirkland Morris, assistant vice-president of strategic policy and programs for Interac Association, said chip cards won't be an overnight solution . He said it will take several years to get enough cards and machines into the market before the industry can take a "serious bite" out of fraud. He said the industry is focused on taking away the most convenient places for fraudsters -- ATMs. "That's where most counterfeit cards are used today. If you take ATMs away from fraudsters, you really take away a lot of the payback to them in card skimming," he said. "Ultimately, our goal is to push the fraudsters out of Canada to somewhere where the mag stripe infrastructure is more prevalent." Morris said he was hesitant to proclaim that any system is impenetrable but he said chip cards provide a "huge" leap forward in terms of security. "It allows us to continue to evolve security within the new technology. Each time you get a new debit card, it can have more security features than the one it replaced. Because the chip plays an active role in conducting security checks and balances, you can add more security over time. There's a great deal of confidence that we can continue to stay ahead of fraudsters as we move forward," he said. Vivek Chandra, vice-president of chip integration at Scotiabank, said chip cards aren't completely fool-proof. If somebody "shoulder surfs" you at an ATM or retail card reader to get you PIN and then steals your wallet, they'll be able to use your card until you cancel it, he said.

Chip Ahoy IT'S only a matter of time until Canadians are carrying around tiny computers in their wallets. Here's a quick primer on chip card technology.

What is a chip card?
Also known as a "smart card," it's a credit or debit card containing an embedded computer chip. Just like your current debit card, all chip cards, including credit cards, will require a personal identification number (PIN) to be punched in before a transaction can be completed.
What are the benefits of chip cards?
Chip cards and terminals work in tandem to ensure a highly secure transaction by validating both the card and the card holder. The computer chip makes them more difficult to copy, thereby reducing counterfeit fraud.

Why is the industry moving to chip?
It's the latest innovation in the rapidly-changing debit and credit card environment and demonstrates the industry's efforts to further secure Canadian electronic payments. Chip technology is already tested, proven and in wide use in Britain and France. Will chip card transactions be any different than magnetic strip transactions? With a chip terminal, the chip card is inserted and left there for the length of the transaction, as opposed to the quick swipe required for mag stripe cards. The chip card holder simply follows the prompts to complete the transaction. Credit card holders will need to enter a PIN, just as they do now for debit cards.

Are they doing away with the magnetic stripe?
Not yet. Chip terminals will recognize both chip and magnetic stripe cards for the foreseeable future. While this won't be a big deal on this side of the border, it will enable Canadians to shop in the U.S., which has shown no signs of moving away from magnetic stripe technology.
Source: MasterCard Canada