Seattle-area banks rush to transition to new EMV credit cards as analysts warn fraud could increase

Major U.S. credit card companies will next month swap out cards with magnetic strips in favor of new, more secure Europay, Mastercard, Visa (EMV) technology. But transitioning to those little embedded chips could actually increase fraud – at least at first, according to a new report.

Visa and Mastercard set an October deadline to roll out new cards with both traditional magnetic strips and EMV chips, which create temporary payment credentials for each transaction. That’s when consumer finance website NerdWallet says credit card users will be at greater risk for fraud.

As a result, Puget Sound-area banks and credit unions are working overtime to shift to the new cards.

Sean McQuay, NerdWallet’s credit card expert, says EMV chips are more secure when it comes to a physical card. But, while the nation transitions to the new system, traditional cards will be targeted more often.

“Fraudsters will be getting while the getting’s good,” he said Wednesday.

EMV technology is used widely around the world and has been more than a decade. The United Kingdom adopted the chip in 2005, and McQuay says it’s been pretty successful. Since then, the report says counterfeit fraud – when hackers steal credit card information and add it to a physical card – has decreased 63 percent.

But it got worse before it improved. Counterfeit fraud in the UK peaked in 2008 as credit card customers used cards in areas without the infrastructure to support the new chips – especially abroad. McQuay says that will likely happen in the U.S.

Although many users will receive EMV cards this fall, it could be much longer before customers can use those cards universally. Engraved numbers have stuck around for more than 30 years after the magnetic strip was introduced.

Tukwila-based BECU has already started to mass-issue new credit cards and will begin switching out debit cards later this year. BECU spokesman Todd Pietzsch says the company thought delaying the transition would put customers at risk.

“We didn’t want to be late to the party,” he said. “We knew we could be singled out.”

McQuay says a slow transition could create hotspots for fraud, and users who swipe instead of “dip” the chip could be at greater risk. While card issuers and retailers aren’t required to make the switch, they will be liable for fraudulent transactions if they don’t. Making the switch could cost the retail industry between $20 billion and $30 billion, David French of the National Retail Foundation said.

One of the biggest risks, McQuay says, will be swiping cards at gas stations. It’s more expensive for automatic fuel dispensaries to upgrade – they can’t just replace a card reader. They have to tear out the whole pump. Self-serve gas stations will have a two-year extension before liability shifts. Owners won’t be on the hook for fraudulent purchases until 2017, and many may not make the switch until then.

Gas stations already have the most commonly hacked payment systems. McQuay says that will likely get worse as more retailers switch to the more secure system and hackers have fewer places to steal information.


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