Retailers, banks spar over chip-and-PIN cards

The Retail Industry Leaders Association (RILA) is criticizing banks' and card issuers' decision to roll out chip and signature cards, rather than chip-and-PIN cards, which are more secure.

While major U.S. retail chains—including Walmart (NYSE:WMT) and Target (NYSE:TGT)—have installed terminals to accept chip-and-PIN cards, card issuers don't plan to issue the new cards this year.

Major card issuers, including J.P. Morgan Chase & Co. and Discover Financial Services Inc., are issuing around 50 million cards with chips this year. However, instead of requiring customers to put in a personal identification number (PIN), the new cards simply require a signature.

Chip-and-signature cards "are such a big shift that we didn't want to make it more difficult than it already will be" by requiring a PIN, Jon Krauss, senior manager for card payment strategy at Discover, told The Wall Street Journal.

And, more than half of credit unions said they would miss the October 2015 deadline to issue cards equipped with chips, saying they are concerned about costs and are held up by technical challenges and bottlenecks among plastic card suppliers.

Many large retailers have implemented—or will be implementing—new POS terminals by the October deadline, and want the more secure chip-and-PIN cards. "They don't want to take on the fraud, so they are going to make the investment. If retailers have made the investment in the terminals, then the card issuers should at least be implementing the most secure technology, which is chip-and-PIN," Andrew Szente, vice president of government affairs for RILA, told FierceRetailIT.

While banks and card issuers say that it is too confusing for consumers to remember several different PIN numbers, Szente doesn't believe that is the case. "Consumers are pretty sophisticated and they can remember PINs, especially if they know it is a more secure transaction," Szente said.

In addition, "Card issuers would probably tell you privately that chip-and-PIN is more secure, and the card manufacturers believe that they are more secure. However, no bank wants to be the first one to do it, if it makes their card more difficult to use," Szente said.

RILA plans to continue educating consumers and lawmakers about the need for chip-and-PIN cards. "We don't want to go halfway. What we have seen is that, most people, when they know about more secure technology, would rather use a PIN than a signature," said Allie Brandenburger, director of communications for RILA.

For more:
-See this Wall Street Journal article
-See this article

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