The U.S. adoption of computer-chip payment cards: implications for payment fraud

US financial institutions have announced plans to add computer chips to their debit and credit cards in the next few years, a move likely to make payment card fraud more difficult. Compared with the magnetic-stripe payment cards carried by millions of US consumers, the new chip cards will offer stro...

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Bibliographic Details
Published inEconomic review (Kansas City) p. 59
Main Author Sullivan, Richard J
Format Journal Article
LanguageEnglish
Published Kansas City Federal Reserve Bank of Kansas City 01.01.2013
Subjects
Analysis
Authentication protocols
Codes
Computer hackers
Control
Counterfeiting
Credit and debit card industry
Credit card fraud
Crime prevention
Forgery
Fraud
Integrated circuits
Personal identification numbers
Prevention
Regulation of financial institutions
Safety and security measures
Security management
Semiconductor chips
Semiconductors
Studies
Technology adoption
Trends
United States
United States > US
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Summary:US financial institutions have announced plans to add computer chips to their debit and credit cards in the next few years, a move likely to make payment card fraud more difficult. Compared with the magnetic-stripe payment cards carried by millions of US consumers, the new chip cards will offer stronger defenses against fraud. But they certainly will not put an end to it. This article examines how computer-chip cards work differently from magnetic-stripe cards, describes the security improvements offered by the chips, and reviews their mixed track record at defeating fraud in other countries. US regulators and industry leaders should expect shifts in the nature of payment card fraud and take proactive countermeasures. But the US currently lacks effective tools to gauge what types of fraud are on the rise. Establishing a comprehensive monitoring system could help in assessing the level of payment card fraud, tracking trends in the fraud, and measuring the losses sustained by its victims.
ISSN:0161-2387
2163-422X