Scammers will be Restless During the Strip-to-Chip Transition

Chip on credit cardPhoto by hfng - yayimages.com

EMV chip technology is the next advancement in the fight against credit card fraud. It uses a microchip (you’ll notice it as the gold ‘box’ that is present on most credit cards today) that sends cardmember data to the card reader via a unique, encrypted code. The code is used only once, then another code is generated when a new transaction occurs. In this way, copying or cloning data on the card chip is useless since a new code is generated each time and this has made it harder for thieves who use skimmers at ATMs to be successful.

The EMV chips have become the standard convention of anti-fraud technology. Current projections show that they will entirely replace the traditional magnetic card system in the next four to five years. These chip cards which were introduced to limit the skimming of banking cards is expected to save banks and financial institutions billions of dollars of losses worldwide every year.

According to an extensive research study from an anti-fraud company, credit card fraud is expected to increase during the time period while this credit card transition is shifting from magnetic cards to EMV chip technology. Once this conversion is totlally complete, hackers and fraudsters will have a limited time period to acquire and utilize the skimmed data. According to the estimate, in the four year time period, there will be around $10 billion losses in the US related to the banking card frauds if this transistion is not done. Even though this figure is only an estimation, it must ring a bell for all the parties (businesses, consumers, banks) involved with card transactions that adding the new technology is imperative.  

Rationale Behind The Research   

Other than the statistical forecasting, the study is also sure of the hike in fraud in the wake of strip-to-chip transition due to some other factors.

Case of the UK

EMV credit cards were introduced in the UK around 2006. The territory witnessed nearly 80% increase in card related fraud in the first three subsequent years. This rise happened because people were still in the phase of switching from magnetic strip cards to chip card technology.

Slow transition

According to the data from the previous year, US residents are much behind in switching to the chip card technology. Only 10% of debit cards and 20% of credit cards have switched to chip technology. Another report from the end of the previous year indicates that the pace of strip-to-chip transition is still very slow. This situation entails there is still plenty of room for criminals to rip people off through their magnetic strip cards.

What’s different in chip cards?

Magnetic strip cards are easily decrypted and deciphered by a magnetic strip reader. There is no built-in encryption integrated into these types of cards. On the other hand, the chip card technology hosts a chip which acts as a microprocessor. It has been put in place to run various security checks before approving any transaction.

Skimming chip cards is not as easy as skimming magnetic cards. Unlike magnetic cards, chip cards are able to generate a unique string of integers with every transaction. This data is then sent to the related financial institutions to verify that the same card issued by them is used to make the transaction.

Due to the overabundance of data in chip card technology (since each transaction is represented by a different set of data), it is virtually impossible for banking card skimmers to skim this amount of data with the existing practices.

Avoiding skimming of magnetic cards

While it will still take time for the chip card technology to be completed across all financial transaction cards, you should do your best to avoid having thieves skimming your magnetic cards, especially in the light of current research study. There are some basic practices to adopt in order to limit the chances of getting skimmed on credit card machines.

Try not to lose the sight of your credit card

Whenever you present your card to a salesperson to perform the transaction, keep an eye on the card so that it must not be swiped on more than one reader. The swiping card on two different locations sparks the possibility that the card data has been stolen.

Try to avoid shady card readers

Even though you can’t easily tell about a tempered card reader but try to avoid card readers that are looking different from the usual ones. Generally, skimming devices are fixed with regular card readers.

Regularly read your credit card statements

Even if you are not using your credit card regularly, always go through the credit card statements issued by the financial institute. Statements are a good way to find out about any fraudulent transaction made on your card.   

Always remain vigilant regarding your transactions and banking details. A little extra time in the beginning can save you a lot of time and headaches later.