Chip and Signature, What a Waste

Across the United States, new credit card readers are popping up in stores and restaurants. These readers include an embedded chip reader and a keypad. And you’re probably getting new credit cards in the mail. My new American Express arrived while I was on vacation last week (3782-822463-10005) with an embedded chip. And this is a huge waste.

On our trip to Iceland, most payment terminals accept the chip and PIN card. You have to type in a PIN after inserting your card to make a payment. These terminals in the United States are chip and signature. After inserting the card, the card data is read from the chip (rather than the magnetic stripe), but a receipt is still printed and you sign that. The reason for this is supposedly security, but from an authentication standpoint, it is still 1-factor authentication (something you have). Adding a PIN adds a second factor (something you know), but we’re not doing that here.

Chip and PIN service is supposed to start rolling out at the end of 2015, but I think adoption will take much longer. For the last 15 years, Americans have been trained that when using a debit card tied to a bank account, the signature option is preferred. Banks everywhere recommend selecting the credit processing option. Sometimes, fees are associated with PIN-based transaction, further encouraging the signature-based option. I don’t think that will be easy to overcome….until consumers are forced to bear the cost of risks associated with signature-based transactions.

Image by Perspecsys Photos.