STORES - October 2010 - (Page 76)

LOSS PREVENTION / PAYMENT FRAUD Time to Reshuffle the Card Deck? Chip-and-PIN is moving the fraud needle abroad BY LIZ PARKS A fraudster walks into a store intent on stealing merchandise or committing credit card fraud. The store has technology and best practices in place that make it too difficult or dangerous to carry out the plan, however, so the thief moves on to an easier target. Every LP professional has seen some variation of this event. Now, a similar scenario is playing out on a global level as more countries are converting from mag-swipe credit cards to EMV standard “smart” chip-and-PIN-based payment cards. If a fraudster finds the going tough trying to steal from retailers in countries that have converted to EMV “smart cards,” it’s very likely that, like a thief on the street, he’ll search elsewhere looking for easy pickings, says Jamie Henry, Walmart’s director of payment service. “Those fraudsters are professionals and they are going to find a way to continue their business, which is committing fraud,” Henry says. “They will naturally flow toward and through the path of least resistance, and that will be U.S. retailers. Committing fraud with magswipe cards is simply easier than committing fraud with chip-and-PIN cards.” EMV is the global standard for chip- based payment cards that are tested and governed by EMVCo, founded by Europay, MasterCard and Visa. EMV “smart” chip-based payment cards have been around since 1994, when they were first deployed in Europe. They are called “smart cards” because they contain embedded microprocessor chips with security credentials that are encoded by the card issuer at personalization. These credentials are then encrypted to prevent card cloning, one of the common ways mag-swipe cards are compromised. “For a mere $100, fraudsters can steal personal information off a mag-swipe card and import it onto a counterfeit card,” says Chris Justice, president of Ingenico North America, a leading global provider of retail electronic payment hardware and software solutions. “The chip, on the other hand, is more technologically complex, and the ability for someone to duplicate that chip — and tie it to a four-digit PIN that only the cardholder knows, and then synch that data perfectly back to the card issuer — is nearly impossible.” Nearly a billion EMV cards have been issued worldwide, according to Brian Byrne, a Visa executive and the chair of the EMVCo board of managers. Ingenico, which has a 55 percent share of the secure retail electronic payments market, has more than 15 million terminals deployed across 125 countries. It is working with a number of large U.S. retailers with a global presence (including Walmart) to help them upgrade to EMV in markets outside the United States and to prepare for the likely increase in U.S. bricks-andmortar fraud in the wake of Canada’s recent conversion to EMV. Walmart, says Henry, is a “strong advocate of chip-andPIN for payment.” It is already processing transactions with EMV smart cards outside the United States, has 100 percent of its domestic payment system hardware equipped to accept EMV smart cards and is finalizing WWW.STORES.ORG 76 STORES / OCTOBER 2010 http://WWW.STORES.ORG

Table of Contents for the Digital Edition of STORES - October 2010

STORES - October 2010
Editor’s Page
President’s Page
Retail People
Customer Experience
Game Changer
Power Players
NRFtech Recap
Concept 2 Watch
Customized Shopping
Consumer Behavior
Software & Analytics
Crowd Control
Payment Fraud
ARTS Update
Point of View
NRF News
Retail Industry Calendar
End Cap

STORES - October 2010