New chip technology helps to tackle payment card fraud Winnipeg MB

Because of the high rate of credit card identity theft, credit card technology has developed to include a computer chip that keeps your information secure.

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New chip technology helps to tackle payment card fraud

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(NC)-Forty years ago shoppers buying goods at stores in Montreal or Toronto may have been asked: "Will that be cash or Chargex?" The relatively unsophisticated Chargex card would be unrecognizable to consumers and retailers today as credit cards have evolved to include embossed plastics, a magnetic stripe, a hologram and, now "chip" technology.

"Credit card designs have changed in an attempt to stay a step ahead of fraudsters," said Gord Jamieson, director of payment system risk at Visa Canada. "Chip technology is the next step in that evolution."

A chip card, sometimes referred to as a "smart card," is a credit or debit card with an embedded computer chip containing a microcomputer. The chip can securely store and encrypt confidential information and is virtually impossible to copy. "What that means," continued Jamieson "is that a criminal could not steal the data from one chip card and apply it to a counterfeit card and then use it to buy goods at a store that has a chip-enabled point-of-sale terminal."

Not only will consumers notice the new chip on their credit or debit card, but the way they pay for items in a store will change as well. Visa chip cards will require a personal identification number, or PIN, to authenticate the transaction rather than signing the sales receipt. The use of PIN, which should be kept confidential and known only to the cardholder, will help reduce fraud related to lost and stolen cards.

"When a consumer uses a chip card with a PIN, they'll insert the card into the terminal - as opposed to handing it to a clerk for swiping - and will need to enter their PIN. The card stays in the terminal until the transaction is complete. The terminal will then prompt cardholders so they know when to enter their PIN and when to remove the card," said Jamieson.

Today, more than 86 countries around the world already use chip cards and their experience demonstrates that chip technology has successfully lowered incidences of fraud. According to APACS, the UK payments association, following the U.K. migration to chip cards in 2006, total card fraud losses fell by three percent to £428 million, a decrease of nearly £80 million over the two years prior.

In Canada, the migration to chip started with a multilateral chip trial in Kitchener-Waterloo, Ontario. According to the Multilateral Chip Trial website, as of July 2008 over 300,000 residents who live in the Kitchener-Waterloo area have received chip-enabled credit and debit cards and local merchants have installed more than 2,600 chip-enabled point-of-sale terminals.

Tighter security

In Canada, chip and PIN cards will help make an already safe payments system even more secure.

What's different?

Consumers will notice a few key differences when using a chip card at a chip-enabled terminal:

Self Service: Cardholders should insert the chip card into the terminal rather than handing it to a sales clerk for swiping.

Prompting for PIN: The terminal will request that cardholders enter their PIN to verify the transaction, rather than sign a sales slip.

Are we done? The terminal will indicate when the transaction is complete. The card must stay inserted in the terminal until a message is displayed that confirms that the card can be removed.

- News Canada