Merchant911 - Fraud Prevention for Merchants

Chip and PIN was designed to prevent fraud. Maybe it would be better to say that it was designed to prevent fraud in the areas that use it and to take the fraud losses off the banks. In that sense, it’s a tremendous success.

The business and financial press in the UK have been reporting, to the point of saturation, that fraud losses in the UK have been reduced by 50% over the past three years since Chip and PIN were introduced. The business and financial press in the UK have been reporting, to the point of saturation, that the UK is a hot bed of debit card fraud. The reason - Chip and PIN has driven overseas fraud up by as much as 77% in the last year alone.

Chip and PIN has one major flaw. It isn’t universal. Most European banks will have deployed the technology by 2010. The US has no plans to deploy it - ever. So the magnetic strip on the back of the cards will remain. And that means business as usual for the bad guys. They simply capture the data from the Chip and PIN readers, clone it to a mag-stripe and bingo - they have a workable debit card that can be used where ever Chip and PIN technology isn’t in use - like the US!

And, according to Bob Sullivan over at the Red Tape Chronicals (who is not often wrong) even the encrypted PINs have been hacked. According to that article, indicted criminals involved in the TJX hack and others are accused of

Downloading “tens of millions of credit and debit cards and PIN blocks associated with millions of debit cards.”

Obtaining “technical assistance from criminal associates in decrypting encrypted PIN numbers.”

Cashing out “by encoding the data on magnetic stripes of blank credit/debit cards and using these cards to obtain tens of thousands of dollars at a time from ATMs.”

I urge you to read Mr. Sullivan’s article. Let there be no mistake; fraud is big business operated by well educated and well connected organized crime. But not to worry, the Associations known as Visa and MasterCard are working hard to deal with it with technology like Chip and PIN that puts the losses on the merchants instead of the banks.