But banks and credit card companies are less concerned about lost and stolen cards, which make up about 10% of in-store card fraud, than they are about counterfeit cards, which make up 65% of in-store card fraud, according to Visa officials.
The chief security advantage with a chip card is to protect in-store payment from counterfeit cards, which thieves can manufacture after hacking a store’s financial database to find credit card numbers. The chip in a card uses cryptography to generate a one-time use code for every transaction, which thwarts the creation of counterfeits, bank officials explained.
The financial service industry has long conceded that chip cards are just one tool to protect the entire payment ecosystem from fraud. Efforts are underway to expand beyond chip cards to include tokenization and point-to-point encryption. The PST has even posted a payment security technology roadmap online.
Retailers are aware of the need for security beyond chip cards, the NRF said. “Nearly all major retailers are working to implement data encryption and tokenization, which many experts believe will do more to protect shoppers’ financial data than U.S.-style [chip] cards,” the NRF said.
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