Confusion Continues To Reign With U.S. Chip & PIN

But they are being resisted by the banking industry, which sees no need to invest further in PIN technology, already used with debit cards, resulting in halting adoption and widespread confusion.

A small band of retailers with the clout to call the shots on their branded credit cards is leading the charge. Target Corp is moving ahead with a chip-and-PIN rollout, and Wal-Mart Stores Inc plans to do the same.

But Wal-Mart said it faces obstacles because its credit card partner, Synchrony Financial, is not yet able to handle PINs on credit cards. Synchrony declined comment.

Broadly, U.S. banks are unprepared or resisting the change.

The impasse comes after many consumers got their hands on new credit cards embedded with so-called EMV chips in advance of an Oct. 1 deadline that required retailers to accept chip cards or be liable for fraud losses. EMV stands for EuroPay, MasterCard and Visa.

But only about a third of merchants are actually using the chip technology, according to analyst estimates. The number may not pick up until early next year, if at all, because the retail industry typically halts upgrades during the crucial holiday shopping season.

“PIN issuance will remain a niche,” said Julie Conroy, credit-card analyst with Aite Group.

Banks favor using chip cards verified by old-school signatures, even though chip-and-PIN usage has led to lower fraud over the decade they have been used in Europe and elsewhere.

“The PIN is definitely a must,” said Lance James, chief scientist with cyber intelligence firm Flashpoint. “It’s one extra step that provides true two-factor authentication.”

But bankers say PINs provide little benefit beyond the advantage of using chips in combating the estimated $7 billion-plus in annual U.S. card fraud.

EMV chips thwart criminals who use stolen data to create counterfeit cards, a category that Aite estimates accounts for 37 percent of that fraud. Banks say that PINs only provide additional fraud protection when criminals seek to use lost or stolen cards, a situation that Aite estimates accounts for only 14 percent of fraud.

Banking groups say there are better approaches than PINs for verifying customers and have asked retailers to embrace tokenization and encryption to prevent theft of credit card numbers.

“PIN is a static data element that would not have a meaningful impact on overall payments fraud,” said Electronic Payments Coalition spokesman Sam Fabens.

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