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Feud heats up over chip cards, FBI warning

Matt Hamblen | Oct. 15, 2015
Retail attorney says FBI watered down chip card warning, claims banks play 'fast and loose' with security by not backing PINs.

Doug Johnson, American Bankers Association senior vice president of payments and cybersecurity policy, said last week that the original message could have been confusing to the public about the use of PINs. He said the ABA contacted the FBI on Oct. 8 about its concerns. The FBI removed the original message and posted the revision.

On Wednesday, Johnson called the FBI revision more accurate. "The first release created concern for us and presupposed that customers could demand that retailers use a PIN when that's not the case," he said.

He said the NRF's Duncan's comments that bankers are playing "fast and loose" with security are off base. "It's very interesting to have merchants complain about bank security when it is merchant security that has created these breaches to begin with," he said.

Johnson had said in an interview last week that, "PIN is not going to be adopted in the U.S." Johnson's view represents the opinion of the nation's largest banks in the ABA, but a few smaller and regional banks have backed PIN use with chip credit cards, including First Niagara Financial Group, which has 390 branches in New York, Pennsylvania, Connecticut and Massachusetts.

A PIN "will provide an added layer of anti-fraud protection," with new chip credit cards, First Niagara said in a recent statement about its inclusion of PIN technology.

First Niagara said that credit cards haven't required a PIN, unlike most debit cards, but that customers would need to get accustomed to using a PIN. First Niagara plans to launch an awareness and education campaign to help its customers.

The NRF's Duncan called the original FBI message "crystal clear" about the need for PIN technology, which was lost in the revision. "Consumers need to use a PIN, and banks need to get on board and do what everybody else is doing," Duncan said.

Duncan also said that "banks know that PINs are more secure" and noted that cash withdrawals at ATMs are done with the use of a PIN. "When it's a bank's product at risk, like at an ATM, the bank insists on a PIN, and they know that PINs are more secure," Duncan added.

When merchants install new sales terminals that read chip cards, nearly all will have PIN pads included, which is the way that terminal manufacturers are making them, Duncan said. The NRF has argued that it will cost U.S. merchants up to $35 billion to install new chip card readers, but it would only cost "a little bit more" for banks to put PINs on new chip cards and to update their systems, he said.

"Retailers are spending, but banks don't want to invest one cent more in improving their product," Duncan said.


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