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Should PIN Pads Be Hardened? This Reader Says They Should Be Dumped

August 8th, 2012

The most obvious barrier: magstripe. As long as that strip of metal oxide is still the dominant way of acquiring payment-card information, the PIN pad can’t be killed. Chains could abandon PIN pads, but then they’d lose transactions from any customer who only has a magstripe card. Issuing banks might upgrade all their cards, but they haven’t even upgraded most cards to contactless or Chip-and-PIN in the U.S. Small merchants aren’t willing to swallow the cost of a contactless upgrade without major incentives. And without all those other, smaller merchants on board, chains can’t afford to abandon the magstripe (and the PIN pad).

If you think it’ll be easy to break that circle, look in your wallet. Chances are, every payment card in there has embossed numbers and letters on it. Why? Visa hasn’t required raised characters on credit and debit cards since 2008. In fact, a whole generation of customers and associates have grown up never having heard the kachunkachunk of an imprinting machine. It’s a technology that’s been used since 1959 and became technologically obsolete in 1980 when Visa and MasterCard adopted magstripe.

And yet almost every payment card still supports it—largely because if the power goes off or there’s an equipment malfunction, it’s a more reliable way to get card-present transaction information than just copying it out by hand. (It’s also cheaper and more portable than most PIN pads.)

No wonder we can’t get rid of magstripe. We can’t even ditch the kachunkachunk.

This is why chains need to pay attention to small-merchant POS ideas like Square and similar mobile-phone dongles. It’s the trailing-edge small merchants that define what can’t be abandoned at the POS, even if chains don’t have a use for technology aimed at the little guys.

So when a mobile phone can be used as a card reader, and it’s as reliable as an imprinter if the power goes out or the PIN pad fails, it may actually be possible to convince small merchants to abandon the imprinter as a fallback and we could finally get rid of raised numbers. (It would help if big chains got rid of the just-in-case imprinters gathering dust under their counters, too.)

Then, once the smartphone is the default small-merchant POS device, it’s a small step to replace the dongle with an NFC-equipped phone that can read contactless cards—presuming the issuing banks have finally converted all their cards. (The tiniest merchants could hand-copy card numbers onto receipts, which is what they’re doing now—they’re so small, they can’t even afford imprinters.)

And then we’ll finally be in a position to say goodbye to magstripes—and PIN pads.


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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