In a recent op-ed, the National Retail Federation painted a pretty dire picture of the state of payments security. What was shocking about the piece was that it didn’t represent any of the security developments of the last few years. However, it did represent the dangerous perspective that merchants don’t have a role to play in implementing security technology. The truth is, the electronic payments system is interdependent and while the financial services industry has spent billions of dollars developing new technologies, they can only be so effective if merchants refuse to adopt, or even acknowledge, those technologies. As a result, I thought it would be helpful to describe some of the actual tools that exist today that can create a more secure payments system.
The most visible change is the migration to EMV or chip cards, which you may have noticed on the front of your credit or debit card. Chip cards bring more intelligent security to your credit and debit card by using a unique one-time code to authenticate card transactions. When in place, this technology makes it nearly impossible for a criminal to make fraudulent purchases in stores with a counterfeit card, thereby eliminating the largest portion of fraud in the United States. However (and this will be a recurring theme) this only works if merchants activate the chip readers at the point of sale. Merchants’ own surveys show that almost 50 percent of merchants are choosing to not adopt the new technology. We applaud the merchants that do turn on their chip readers as they will not only protect consumers, they will also have minimalized their liability exposure if someone uses a lost, stolen or counterfeit card at their store.