Chip-and-pin, the card payment system that most of the Western world uses, is finally coming to America. Why should we care? The Economist:
America is the only developed country that still relies exclusively on magnetic strips and signatures. As a result, it is also the only country in which payment card fraud is growing. Some 42% of Americans have experienced some form of card fraud in the past five years. Of the $11.3 billion lost around the world to such crime in 2012, half was in the US.
By the end of next year, use of chip-and-pin cards should be widespread in the U.S. Chase and Wells Fargo have recently announced that they are going to start using the technology, and more are sure to follow, hoping to avoid debacles like last year’s mass theft of card numbers at Target and a few other retailers.The practical upshot of switching to the new card system is that criminals can’t clone your card by surreptitiously swiping it in a reader, and they can’t fraudulently charge things to it electronically using “phishing” or other methods as easily as they can now. And if you lose your card, you don’t have to panic about canceling it right away. Random strangers who happen to find your card can’t access your money just by “verifying” that they are you by scribbling a signature on a payment slip or pad. The technical procedure by which money transfers are enacted is safer as well, since chip and pin systems generate a unique numerical code for each new transaction.But this story is also about a lot more than just efficiency and protecting consumers against fraud. In our increasingly networked world, states and non-state actors will use small and large scale cyber attacks to target weak points in America’s infrastructure to sow chaos or in some cases do actual physical harm. We’ve mentioned before how woefully unprepared the U.S. is when it comes to the security of its energy infrastructure. It’s no less important to close up vulnerabilities in our financial infrastructure.