StORES Magazine - September 2007 - (Page 98) NUTS AND BOLTS / CREDIT No Card Left Behind New technology promises smart-card benefits without a POS overhaul BY PATRICIA A. MURPHY T here are no easy fixes when it comes to protecting the information on credit and debit cards, Just ask executives at the leading international card brands. For nearly a decade now, the three companies (MasterCard, Visa and JCB International) have been pushing a universal chip-card standard known as EMV, which they believe will thwart attempts to steal cardholder information. But adoption has been slowed by a number of factors and has met with especially strong resistance in the United States where magnetic-stripe technology has deep roots. Now, QSecure, a Silicon Valley startup with strong ties to payments companies, is rolling out an “intelligent” magstripe technology that it claims can provide security levels at least as good as those offered by chip cards, without the corresponding need to swap out existing POS card-reading devices for smartcard readers. The technology, patented under the name SmartStripe, combines dynamic cryptography with old-fashioned magnetic stripe technologies to uniquely validate each transaction initiated with a credit or debit card. Every time a card with a SmartStripe is run through a POS reader, a tiny chip embedded in the stripe produces a unique cryptographic number which is authenticated using software that operates in tandem with the card issuer’s authorization systems. That way, if a card is compromised — someone “skims” the mag stripe, or the merchant gets hacked — and there’s an attempt to use a cloned card, the issuer will know on the spot and be able to stop the transaction. The only data that 98 STORES / SEPTEMBER 2007 can be compromised (the crypto number) is valid for just one use only. It’s like having a new card every time a customer pays by credit or debit card. “We wanted to build a solution that didn’t require any changes in retailers’ or cardholders’ behavior,” says QSecure president and CEO David Watkins. Los Altos, Calif.-based QSecure is working with several “major” domestic and international card issuers and manufacturers, says Watkins, who predicts that wide-scale product rollouts involving large card issuers will begin late next year. The cost of card fraud, which is borne primarily by merchants and banks, can be steep. In a study released in April, Javelin Strategy & Research of San Francisco estimated that fraudulent credit and debit card transactions triggered more than $30 billion in losses to banks and merchants last year. Perhaps of even greater concern to retailers: 77 percent of consumers surveyed by Javelin said they would stop shopping at merchants they believed were culpable for card data breaches. Consumers “are understandably concerned that their card data can be compromised,” Watkins says. Different kind of smart Card frauds – especially those tied to data breaches – have become so troubling that, in some regions of the world, the leading card brands have abandoned mag-stripe technologies in favor of “smart” cards. With smart cards, crucial account information (including information about a cardholder’s personal identification number) is stored on a microprocessor chip embedded on the face of the plastic card. The chip then interacts with POS devices (including PIN pads) to prompt authorization. MasterCard, Visa and JCB support interoperable standards for smart cards (EMV), which proponents believe positions smart cards to replace mag-stripe cards. Many card issuers in Europe have distributed EMV-compliant smart cards, and earlier this year banks in Canada began a similar conversion from magstripe cards. In the United States, however, merchants and banks have been reluctant to switch to smart-card acceptance, with one of the arguments being WWW.STORES.ORG CONSUMERS WEIGH IN ON CARD DATA BREACHES percent of consumers intend to stop shopping at merchants known to have suffered data breaches percent believe retailers and merchants aren’t doing enough to protect customer card data 77 63 85 percent of shoppers say they would purchase more from retailers they perceive as security leaders Source: Javelin Strategy & Research http://WWW.STORES.ORG
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