Remember the Target breach of 2013 when hackers stole the credit card information of 40 million customers from the retailer’s databases? This past March, a federal judge approved a preliminary $10 million settlement to Target’s customers as a result of that breach — and that only represents a fraction of the cost to the organization.
Businesses in every sector responded with better encryption methods, but during that timeframe, consumer payment methods also evolved quite a bit. Understanding the current environment is vital for retailers as they seek to keep up with the new wave of technology that’s steering the payment world.
Why Magnetic Strips Aren’t Secure
Magnetic strips were the industry standard for a long time, but breaches like Target’s highlight just one form of fraud they’re susceptible to. Take, for example, the time a few men stole prepaid debit card numbers and were able to program the information into the magnetic strip of hotel keys.
PINs are a great defense, but many retailers prefer credit transactions over debit because debit requires a PIN pad. Plus, many customers don’t trust entering their PIN for fear of having it stolen. So financial institutions implemented EMV chips as a way to reduce fraud by verifying transactions similar to Tor and PGP encryption protocols.
EMV Is the Future
Although EMV technology has been in the works for decades, many retailers still aren’t equipped to make this change. But now, by hook or by crook, they’ll have to be.
Starting this month, Visa and MasterCard will no longer accept chargebacks from retailers who are unequipped for EMV chip-and-PIN transactions. This means small stores and big chains across the globe will be forced to migrate to new or updated payment processing systems that accommodate chipped cards — a pricey endeavor, especially for those that have already embraced NFC payments as well.
New EMV card readers can also accept payments from Samsung Pay-equipped smartphones, while NFC readers are compatible with Apple Pay, Android Pay, PayPal, and the slew of services currently negotiating with financial institutions and preparing to launch.
A Step Toward Security
It’s important to understand that these new payment authorization methods are meant to better verify and track transactional fraud. But only strong security and due diligence at the cash register can truly prevent retail fraud from occurring.
EMV and NFC are certainly a step in the right direction when it comes to slowing down in-person storefront fraud, but slowing down Internet fraud is a completely different story. Even with this new technology, customers must still protect their physical cards from being misplaced or stolen. And further hacks aren’t out of the question, either, as Samsung’s LoopPay was recently breached by Chinese hackers.
But at the end of the day, every modern retailer needs to be committed to adopting EMV technology. Not only does it protect your store from fraud, but it also ensures your valued customer’s hard-earned money remains safe and secure.
Don Siclari founded InChek while he was still a student and has grown the business expansive payment processing to merchants. An entrepreneur, coach, professional speaker, licensed paramedic, and consummate networker, Don is often found socializing with his clients while traveling between his homes in the Northeast and Las Vegas, where he keeps...