ALEXANDRIA, Va. – When NACS members head to Capitol Hill on March 14–16 for the NACS Government Relations Conference, one issue that we’ll be calling attention to is why PIN is the most secure authentication technology currently available, and why retailers should have the option to require PIN if they so desire.
PIN technology is a proven security solution available today. All EMV point-of-sale readers are PIN-enabled with encrypted security. And when PIN is required, whether a card number or the card itself is stolen, a PIN protects consumers against fraud. A 2013 Federal Reserve study revealed that not using PIN carries 400% more fraud, which is why PIN use is the de facto standard for world payments.
However, while all banks require PIN authentication to access an ATM to prevent fraud, the credit card companies won’t take the same precaution to protect consumers when their cards are used in stores. And now with the transition to EMV chip cards underway, without the use of PINs the transition will not improve security as much as it could.
NACS President and CEO Henry Armour penned an op-ed in Politico to communicate to Washington that consumers deserve an extra level of security at the gas pump and inside the store, which is why convenience retailers should be able to offer PIN security to their credit card customers.
“The proven way to reduce credit and debit card fraud is by using computer [EMV] chips in conjunction with PINs. This technology has been used successfully throughout the world for years,” wrote Armour, noting that merchants have a major incentive to eliminate credit and debit card fraud. The Kansas City Federal Reserve found that 80% to 90% of all the fraud losses on credit and debit card transactions were absorbed by merchants.
Armour wrote that convenience retailers are investing in new POS equipment that accepts EMV cards, noting that stores will spend roughly $4 billion for new card readers and the security software systems—an industrywide investment for a new layer of security that will cost approximately $30 billion.
“However, even with this new technology, chip cards will still need a magnetic stripe as a backup for at least 10 years,” he cautioned. “As a result, fraud can easily persist through the back-up magnetic stripe when there is only a chip (but no PIN) to protect the customer.”
The use of a PIN, noted Armour, has a track record of remaining secure. Unlike card numbers, a PIN is immediately encrypted. Using a private PIN also introduces “a layer of security to ensure that the only person using the card is the legitimate cardholder. A PIN won’t eliminate every instance of fraud, but it stops it about 84% of the time.
Most card readers in the United States, and all new card readers, are capable of accepting a PIN. “America’s convenience stores and retailers want to be able to offer their customers the extra level of PIN security,” Armour said.