EMV smartcards offer security benefits even without PIN, Visa says

Chip cards can help eliminate counterfeit fraud, Visa exec says

A senior executive from Visa Inc. this week dismissed concerns over the manner in which the Europay MasterCard Visa (EMV) chip card standard is being implemented in the U.S. and insisted the move will yield significant security benefits for retailers, consumers and banks.

In an interview with Computerworld, Ellen Richey, Visa's chief risk officer, said that EMV smartcards have all but eliminated counterfeit fraud in the countries where the technology has been adopted. The same benefits will become available to the U.S. payment system when the switch is made to EMV.

Visa and MasterCard require U.S merchants and card-issuing banks to migrate to EMV technology by October 2015 or face increased liability exposure.

Some groups, like the Retail Industry Leaders Association (RILA), have noted that the smartcard mandate leaves gaps in payment card security because it does not require merchants or banks to support PIN-based authentication.

Chip and PIN implementations are considered more secure than chip and signature-based implementations. In a majority of countries that have moved to EMV technology, users are typically required to enter a PIN to conduct a payment transaction at a point-of-sale terminal.

In the U.S., however, both Visa and MasterCard have left it up to banks and retailers to decide if they want to implement chip and PIN or chip and signature-based models, prompting concern from groups like the RILA. The U.S. is among about two dozen countries that don't require a PIN to conduct a smartcard transaction.

Richey noted that concerns about the lack of a PIN requirement are misplaced. Credit and debit cards based on the EMV standard offer significant protection against fraud even when the cards are used without a PIN, Richey said.

Chip technology, with or without a PIN, prevents counterfeit fraud, which represents the biggest category of payment card fraud in the U.S., Richey said.

PIN-based authentication can help address fraud involving cards that are lost or stolen. But that type of fraud is relatively small and does not merit the additional investments that will be required to implement a PIN requirement, Richey said.

Significantly, PINs are an extremely valuable target for malicious hackers and therefore need to be protected at additional cost. Mandating a PIN requirement for all transactions would also add to the cost, complexity and time involved in moving from magnetic stripe technology to EMV, Richey said.

Though Visa's roadmap does not require PIN, the company will support all cardholder verification models including signature, PIN, and no-signature-no-PIN requirements for certain low-value transactions, such as those at an unmanned kiosk.

Visa's priority going forward is to gradually eliminate the use of static data such as PINs as authentication for payment transactions, she said.

Richey noted that it is unfair to expect EMV to be effective against all types of payment card fraud. Many for instance, have noted that EMV is useful only for card-present transactions at point-of-sale terminals and is less effective in card-not-present situations such as those involving online purchases.

EMV plays a crucial role in bolstering payment card security, but it is only part of a multi-layered approach to security. Approaches like tokenization, fraud detection networks and dynamic authentication are all key to bolstering payment card security she said.

The EMV standard has received considerable attention from stakeholders in the U.S payment industry and from lawmakers following the massive data breach at Target that exposed data on 40 million credit and debit cards.

Cards based on the EMV standard use an embedded microprocessor instead of a magnetic stripe to store cardholder data.

This article, EMV smartcards offer security benefits even without PIN, Visa says, was originally published at Computerworld.com.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan or subscribe to Jaikumar's RSS feed. His e-mail address is jvijayan@computerworld.com.

See more by Jaikumar Vijayan on Computerworld.com.

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