Friday, June 6, 2008

More on Australia's PEN or PIN Program

Credit card users will be given the option of entering a PIN as an alternative to signing their name to authenticate a transaction under a banking industry initiative scheduled to start today. (June 4th)

Simon Greig, principle for Phoenix IT&T Consulting — contracted by the industry to manage the transition to the 'Pen or Pin' project for credit card transactions — says all of the banks are ready for the move. The main impetus for the initiative, led by Mastercard and Visa, is convenience and not necessarily security, he said. "The objective here is to provide a choice for cardholders," he said. "Australian consumers have been using PIN numbers for decades on their EFTPOS cards, and now they will have that option on their credit cards." "This is not a fraud-related activity," he said. "'It's simply about an option of convenience for cardholders that would like to use a PIN.

And for the retailer, they don't have to use their discretion to judge a signature." The initiative is unrelated, Greig said, to chip and PIN technology being pitched by some banks to reduce credit card fraud. Most Australian banks — including Westpac and the Commonwealth Bank, are trialing chip and PIN technology — which replaces the magnetic strip of a credit card with a microchip — and requires customers to enter a PIN number. It is deemed to be a far more secure approach to today's credit card transactions.

A spokesperson for the Commonwealth Bank told ZDNet.com.au that the bank does expect 'Pin or Pen' to "afford the customer additional [security] protection", but believes the real gains in security terms are more likely to be addressed by chip and PIN. "[Commonwealth] Bank takes card security very seriously and is currently working on its chip card solution," the spokesperson said.

Upon introduction in the UK, chip and PIN security faced its share of teething problems. However, the UK experience, says Greig, involved consumers that had rarely used PIN numbers engaging in a "massive leap" into chip and PIN. He doesn't expect such issues to arise in Australia, where consumers "have been using PIN numbers since the seventies. He also doesn't see 'Pen or Pin' being used as an excuse by banks to transfer liability for fraudulent transactions onto merchants and users, as UK banks have aimed to with chip and PIN. Greig said that under the new 'Pen or Pin' option, cardholders and merchants will be bound by the same rules and regulations using a PIN number as they would if a signature option was used."I have not heard of anybody changing their terms of use," he said.

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