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FBI takes down alert on chip credit cards after bankers complain

Matt Hamblen | Oct. 12, 2015
Original FBI announcement urged use of PIN with a chip-embedded card, which banks oppose.

But Johnson asserted that PINs won't be used in the U.S. "PIN is not going to be adopted in the U.S.," Johnson flatly said.

In the FBI's original PSA, there was language that consumers "should use the PIN, instead of a signature, to verify the transaction," even though banks have not been issuing PINs with new chip credit cards. Four-digit PINs are used with debit cards, however, but many merchants are still not accepting chip-enabled debit cards.

"The suggestion and recommendation from the Bureau that a customer request to be able to use their PIN would be confusing…and creates confusion in the market," Johnson explained.

The original FBI statement also noted that while chip cards "offer enhanced security, the FBI is warning law enforcement, merchants and the general public that these cards can still be targeted by fraudsters."

The purpose of the chip on newer cards is to prevent counterfeit fraud when thieves steal card data from merchants' computer servers and manufacture fake cards with stolen 16-digit card numbers and four-digit expiration dates. Because the chip allows a unique code to be used with each transaction, it is difficult for thieves to steal card numbers from merchants' servers.

Johnson added it is also considered "extremely hard" for fraudsters to manufacture a credit card with an embedded computer chip. The original FBI announcement "suggested a chip card is easy to replicate, which it is not," he said. If credit card numbers are somehow stolen from a merchant's database, a fraudster could conceivably imprint an account number on a magnetic stripe on a new card. However, a newer point-of-sale terminal could detect that it should have been a chip card, not a magnetic stripe card, and would deny the transaction, he said.

A lost or stolen chip card can still be used fraudulently by a thief in a store purchase or by phone or online, an event that retailers believe use of a PIN will prevent. However, only about 5% of card fraud comes from stolen or lost cards, Johnson said. In its original message, the FBI pointed out vulnerabilities with chip cards, including that chip cards still have magnetic stripes that are vulnerable to thieves.

Retailers have asserted that their investment of billions of dollars in new terminals to support chip cards should be accompanied by a willingness by banks and card companies to support PIN technology.

Several analysts have described a trend toward the use of PINs in Canada and some countries in Europe, where chip cards have been in use for several years.

However, Stephanie Ericksen, Visa's vice president of risk products, recently said there's a movement away from PINs in both Canada and Europe.

 

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