FBI Issues Warning on New Chip Cards

PRESS RELEASE

ARLINGTON, VA — This morning the FBI issued a warning about new chip credit and debit cards that are being issued to consumers saying, “When using the EMV card at a PoS terminal, consumers should use the PIN, instead of a signature, to verify the transaction.”

This warning states what retailers have been saying all along, which is that the new chip cards issued by banks need an accompanying PIN. Retailers have consistently urged banks and credit unions to ditch the signature and adopt the PIN. U.S. banks and credit unions have argued that the chip is enough, and will prevent counterfeit chargess from being made. 

“Retailers have long-argued that PINs are essential to providing cardholders with the security that they deserve. The FBI’s alert should be a wake-up call to the banks and card networks that continue to stand in the way of making PIN authentication the standard in the U.S. just as it has been around the world for years,” said Brian Dodge, executive vice president of the Retail Industry Leaders Association (RILA).

The FBI alert also urges retailers to require that PINs be used at the point of sale. Unfortunately, merchants cannot force consumers to enter a PIN if a card has been issued without one, and further, card network rules prohibit merchants from requiring a PIN when one exists.   

“Retailers have invested billions to implement new chip-enabled card readers in stores nationwide. Now, retailers are asking banks and credit unions to meet that commitment by issuing new chip cards with PINs,” added Dodge.

It is high time for banks and credit unions to heed the words of both the FBI and the Federal Reserve and issue consumers the most secure standard of payment—chip-and-PIN cards.

View the FBI Alert here.

Notable:

Federal Reserve Gov. Jerome Powell: "The deployment of EMV chip cards in the United States represents an important step forward. But we should not stop there," he said. "New approaches to authentication increasingly offer greater assurance and protection. Given the current technologies that we have at our disposal, we should assess the continued use of signatures as a means of authenticating card transactions." (Tanaya Macheel, “Banks Should Rethink Signature Verification, Fed’s Powell Says,” American Banker, 6/25/15)

Including A PIN Can Make A Transaction Up To 700 Percent More Secure. A 2013 study by the Federal Reserve found that using PINs in debit card transactions reduced fraud by 700 percent. (“2011 Interchange Fee Revenue, Covered Issuer Costs, And Covered Issuer And Merchant Fraud Losses Related To Debit Card Transactions,” Federal Reserve, 3/5/13) 

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.