Why is US card security so lax?

The data breach of retailer Target Corp’s credit card system shows how lax US card security is, even though technology widely used in Europe, Canada and other parts of the world is available.

According to experts, cases of credit card fraud and hackers getting into systems in the US will get worse before they improve.

American retailers and financial institutions have been reticent about using credit and debit cards that store data on computer chips.

It is not rocket science, there is no need for research and development, because the technology is already there and used extensively in other parts of the world.

Data on chips much harder to hack

It is much more difficult for criminals to manipulate data in chips compared to the magnetic stripes.

Each time a card with a digital chip is used it generates a new code, making it much harder for fraudsters to replicate. According to experts, it is so difficult that they do not bother.

Target Corp is the third largest retailer in America, approximately forty million debit and credit cards used at its retail outlets across the country were hacked between November 27th and December 15th.

Credit card fraud has for many years been tolerated by US merchants as one of the unavoidable costs of doing business. However, the problem is rapidly getting worse and something needs to be done about card security.

In an interview with Reuters, Rush Taggart, chief security officer of CardConnect of King of Prussia, Pennsylvania, said “There’s no doubt in my mind it will happen over the next two years. The fraud risk is too high. I think we all wish it had happened over the last four years.”

In 2012, global credit card fraud hit $11.27 billion, a record. According to the Nilson Report, credit card fraud accounts for 5.2 cents in every $100 in transactions worldwide. This does not sound like much, but a large chunk of this occurs in the US, a juicy target with easy-to-retrieve out-of-date systems.

If businesses do not upgrade they may become liable for the costs of fraud as from October 2015, Visa Inc. announced.

How many card sales terminals can use the digital chip system?:

  • Europe – 94%.
  • Canada – 77%.
  • Latin America – 77%.
  • The US – 10%.

According to Senior Vice President and General Counsel of the National Retail Federation, Mallory Duncan, “We are using 20th century cards against 21st century hackers. The thieves have moved on but the cards have not.”