Chip Cards: The Price of Security
August 3rd, 2016Smart credit cards, or chip cards, were popular in Europe long before they debuted in the U.S. Here, financial institutions were complacent and believed that existing technology was secure.
Now chip cards use integrated circuits to provide greatly enhanced security. One common problem they are designed to circumvent is credit card skimming, a process that hacks a card reader and grabs your card information. It’s particularly vexing and the data even includes your debit card’s pin number, which grants access to all of the money in that account.
That situation began to change in 2014, when tens of millions of credit cards were compromised due to high-profile break-ins at a number of merchants, including Target. As an occasional Target customer, this was particularly disconcerting, and it so happens that one of my bank accounts was compromised, but not until the following year. The bank wasn’t terribly informative about where and how the intrusion occurred — so I’m not certain it was the result of the Target intrusion — and I didn’t lose any money as a result. Still, American banks are now rushing to incorporate the technology into their cards.
Without going into details, I have one debit card without chip support. But my wife, who has an account at a different bank that she shares with our son, received a chip card on the last revision.
The extra security is welcome, and I’m awaiting for my bank to replace my debit card with one that has the chip. However, the price of security means that transactions can be awkward. The price of safety I fear, and those of you in the U.S. with chip cards will understand. I’m not at all sure how well it works in Europe.
Take a typical purchase at Walmart, which recently upgraded its point-of-sale terminals to support both chips and Walmart Pay. The latter is their answer to Apple Pay and is evidently meant to replace the failed CurrentC mobile payment technology. It uses a QR code and a special Walmart app to make and record your purchases. Since I haven’t tried it, I cannot attest to its ease of use, but it does appear to be clumsier than Apple Pay, which requires an iPhone with an NFC chip or an Apple Watch.
In any case, on a recent visit to Walmart, I took my wife’s debit card with me. If you’ve used one, you’ll realize that you no longer swipe the card. Instead, you insert the left edge of the card into a special slot at the bottom of the terminal. Rather than remove the card once it’s read, the chip card must stay in the terminal until the transaction is concluded, and the processing steps can be fairly sluggish compared to a regular credit card.
When I went to my wife’s bank to withdraw some money via an ATM machine, I got to see further downsides to the process. While some banks swallow your debit card whole, other financial institutions allow you to insert the card and remove it as soon as it’s read. But not so with a chip card. Rather than withdraw the card, once again it has to remain inserted until the final step in the transaction. You have to wait extra minutes as the ATM slogs through the process. Worse, the bank my wife uses still has a message on the screen saying you should just insert and remove the card from the reader even though that’s not correct when you use the chip card.
Ah, the price of security.
While I welcome the added protections — who wouldn’t? — I do not welcome the clumsy way in which the technology has been implemented in this country. Even when a bank’s information menus appear to have been modernized somewhat beyond the 1990’s Windows-style interface that many display, it does seem as if the ATM’s microprocessors are barely able to cope with chip cards.
I would like to believe that this is just a first generation technology, that, as ATM interfaces, many of which are based on Windows, improve, things will get decidedly better. It does seem as if the chip card technology has been tacked on, rather than developed from the ground up. That will hardly convince customers to want to stick with the chip cards, not that they necessarily have a choice once a new card is issued.
Oh, and I checked my bank’s site, and they do offer chip cards. While I’m not enamored of the technology, or its lack of performance, having been bitten by fake charges a time or two, I would prefer to enhance the protection, so I plan to request one. True, the bank supports Apple Pay, and those transactions are reasonably swift, but few of the merchants I deal with have opted to work with Apple. I suppose that’ll change some day, since the Apple Pay user base and merchant support continues to grow. In saying that, though, it does appear that, after trying the system a few times, some customers prefer to return to the credit card since they prefer to pull out a card rather than schlepp an iPhone out of their pocket or purse. Well, there’s always an Apple Watch, but the user base is still quite small.
The message here is that extra security for your bank or credit cards is important, but when the process of using them becomes cumbersome, customer adoption will be slow. But this is a U.S.-centric view. I would love to hear from our readers in Europe about their experiences with chip cards.
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The simplest security technology is pretty nearly universal in Europe but unheard of in the US. Over there, you eat. Then, when it comes time to settle up, the waiter comes by with a small device. You give it to him, he puts the card in the device, the card registers, the gizmo prints out a slip for you to sign, he hands your card back. At no time is it out of your sight and you can see exactly what he’s doing with it. Over here, you hand your card to the waiter, he disappears and comes back a few minutes later bearing your card and a slip to sign. All this time it’s been out of your sight, you have no real way of telling what the hell he’s done with it, and you can only hope he’s trustworthy. That gizmo is a far, far more effective form of security than a chip could ever be.
I have no idea why chip card processing is so slow in the US. I was in Australia recently and it rarely took more than a second or two. I’d insert the card, hit a key to OK the charge, then remove my card. This worked fine at restaurants, in taxis, at hotels, at bakeries, in convenience stores just about everywhere. It was no slower at Uluru or backwater Tasmania than in downtown Sydney.
My guess is that the existing swipe card processing was always slow due to software inertia and mediocre communications, but that this was hidden by the ability to put your card away while waiting for card approval. A chip card has to stay in the reader for this entire operation. The US has computers and internet connections that are just as fast as those in Australia, so this is all about the crummy software.
You don’t need to go as far as Europe to get feedback re chip card usage. Try looking just north of your border, Gene. Canada has had chip and PIN for all credit and debit cards for years. And the mobile payment machines in restaurants are very common. The “awkward” feeling you experience is nothing other than unfamiliarity.
I spend the Winter in Florida, so have a US CapitalOne Visa and TD Bank Visa and debit cards. When Cap1 sent me the chip card last Fall, I thought that this was a good thing…the US banking system trying to catch up with the world. Then I discovered that these cards coming out are Chip and Signature. Call me severely underwhelmed with this “security” enhancement. Here in Canada, if I lose a card, nobody can use it in a store. If I lose a card in the US, the finder (or thief) can use it without any problem since cashiers never compare a written signature to the signature on the back of a card. And of course, in some stores signature is not required.
In general, I don’t notice a significant difference in the processing time, while the card is inserted in the US terminals. At least the security is improved even in these chip and signature cards, so that is a positive thing.
My biggest frustration is so many stores have the chip reader terminal, BUT the system is turned off. I have learned to ask rather than waste my time inserting the card first. The smarter stores have some sort of a little note on the terminal saying chip is not usable.
Now, Apple Pay is usable in virtually any store in Canada. Contactless terminals do not need to be Apple Pay compatible specifically. Unless the transaction is over $100, I use Apple Pay with an almost perfect success rate. When I look at the list of Apple Pay compatible stores in the US, I am so disappointed. My experience over the last 2 Winters in Florida has taught me that I shouldn’t waste my time trying Apple Pay unless that store specifically supports Apple Pay. What a contrast to home, but at least it is warm…