Will Banks Finally Embrace Chip and PIN Technology after Walmart Announcement?

Will Banks Wake up to the Idea of Chip and PIN in the US?

A couple of interesting developments have occurred as of late demonstrating a possible momentum shift towards Chip and PIN technology here in the U.S.  Last month, Bell ID and ACI Worldwide announced that they had secured their first North American Banking customer.  

First Joint Customer for ACI Worldwide/Bell ID Strategic Partnership

New York, N.Y. – 28 April 2010 – ACI Worldwide, Inc. (Nasdaq: ACIW) and Bell ID, both leading international providers of electronic payments software and solutions, announced today that the two companies have contracted with the first customer as part of their strategic partnership launched late last year.  See: ACI Worldwide Announces Alliance with Bell ID to Provide Smart Card Solutions.  A financial institution in North America has selected the ANDiS4EMV solution for EMV card management, as a long-term investment in card issuing and to ensure it can always respond to changing customer and market demands.  Read more...



Soon thereafter, Walmart announced that they want Chip and PIN here in the U.S.  Last week, Storefront Backtalk had this report from the Smart Card Alliance event here in Scottsdale:  

Wal-Mart: “It’s Time For Chip-And-PIN In The U.S.”

With major card brands and the banks strongly opposed to Chip-and-PIN efforts in the United States, there’s only one way it’s going to happen–and that happened Wednesday (May 19): Wal-Mart publicly forced the issue. When the world’s largest retailer insists on a path, even Visa has to listen. And Wal-Mart is now insisting on a domestic Chip-and-PIN (EMV) program.  Jamie Henry, Wal-Mart’s director of payment services, told attendees of a panel discussion held Wednesday at a Smart Card Alliance event in Scottsdale, Ariz. “Wal-Mart’s POS hardware is 100 percent Chip-and-PIN capable. Our hardware is in place,” although the software needs some work. “We are working on implementing it in the U.S. It’s time for Chip-and-PIN in the U.S. Let’s get a roadmap and move it forward here in the United States.”

So we have Walmart backing Chip and PIN and a yet to be announced "North American Bank" who is going to be issuing EMV cards managed by Bell ID's ANDiS4EMV solution, one that is extremely popular in Europe.



Is this the beginning of the end of magnetic striped cards?  Not quite yet.  Now we are hearing that, as smartcards loom, there is an effort underway to make existing magnetic stripe technology more secure.

Computerworld - As news of Wal-Mart Stores Inc.'s plan to convert its U.S. payment terminals to smartcard-compatible systems surfaced, there was also news of efforts to make existing magnetic stripe cards more secure. One effort that appears to have made considerable progress involves a card authentication technology that uses information from the magnetic stripe on the back of each card to create a unique digital fingerprint of the card. Each time the card is used, information from its magnetic stripe is matched with its fingerprint. The technology is designed to use data about stolen cards to detect and stop the use of counterfeit cards at the payment terminal.  A major U.S. retailer will be announcing its support for the technology within the next one month or so, said Tom Patterson, chief security officer at MagTek Inc., a Seal Beach, Calif.-based vendor of card readers, check scanners, PIN pads and other electronic payment and identification products.  Patterson said the unnamed retailer is equipping about 30,000 of its outlets with payment terminals featuring a MagTek technology that captures specific magnetic stripe information and compares it to a baseline "fingerprint," stored by the card issuer, for that card. Fifth Third Bank piloted similar technologywith Visa last year.

Meanwhile, FierceFinanceIT reports that an underlying factor in the decision to stick with magstripe technology vs. the more secure smart card technology has to do with lie-ability. (sic)

From FierceFinanceIT:  

Chip-and-PIN smartcard technology has not really taken off with banks, despite some obvious security advantages. But are we at an inflection point?

Wal-Mart is reportedly planning on making all its payment terminals in the U.S. compliant with a smartcard-based credit card (credit card news) technology that is widely used around the world but isn't common in the U.S. Given the retailers heft, this just might prompt banks to finally embrace the technology.

Banks have had reason to stick with the old magnetic stripe technology for several reasons, one of which has to do with the ultimate liability. Some have argued that because card issuers are not liable for losses that stem from their use of static cards (which are much cheaper than smartcards), they have chosen not to embrace chip-and-PIN. Another issue is the cost of conversion.

Of course, the new terminals to be installed at Wal-Mart will not be of any use if banks decide not to upgrade. We may see some coordinated activity and timetable soon. For security reasons, U.S. banks may not be able to stick with the old technology for much longer. That said, the industry has already invested in safer magnetic stripes, so the decision is not straightforward. 

For more:

- here's a ComputerWorld article

Read more: http://www.fiercefinanceit.com/story/banks-finally-embrace-chip-and-pin-tech/2010-05-26#ixzz0p9AkS3UL

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