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Chip And PIN: On Their Way To A Mailbox Near You

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Thanks to two massive data breaches and one case of what the bank described as “suspected fraud,” I have had to replace two credit cards and a debit card, plus close one bank account and open a new one – all in the span of about six months.

It was a pain for me but I’m sure it caused my bank and my credit card issuer some serious financial pain when you multiply the cost of reissuing cards and changing accounts by the millions of people affected by the breach.

Now, just in time for the holiday shopping season, consumers can expect to see the first high-tech chip credit cards in their mailboxes soon.

CNBC reported that U.S. credit card issuers, burned by a series of data breaches at major retailers such as Home Depot, have stepped up their timetable for issuing cards with what is known as “chip and PIN” technology. Such technology is widespread in Europe, where cards require a unique user code instead of a simple swipe.

The word was that card issuers in this country would begin introducing chip and PIN gradually but, according to CNBC, decided they could no longer wait.

“After a larger breach like with Home Depot,” said Paul Kleinschnitz, senior vice president in the cybersecurity group at First Data, “they said, ‘We’re not going to take this trickle approach. We’re going to do a massive reissuance as soon as possible.’”

Replacing the more than 1 billion swipe cards in use in the U.S. will be a major task.

Chase, the nation’s largest credit card issuer, first focused on replacing cards like the British Airways Visa or Ritz Carlton Rewards card, for customers who frequently traveled internationally, Jen Roberts, president of Chase’s high net-worth card business, told CNBC. Those customers, the companies said, would be able to use chip-and-PIN machines abroad and be less susceptible to fraud that takes place overseas.

But the nation’s No. 3 card issuer, Bank of America, stepped up the replacement game by announcing earlier this month that it would begin replacing all expired and lost cards with new chip-enabled cards.

Chip cards are more expensive to produce than the traditional magnetic strip cards. And many consumers who already had to replace their cards may not be in a rush to go out and do it again.

But they may not have a choice. An industry task force led by MasterCard and Visa has set an October 2015 deadline for the majority of American cardholders to have switched over to chip; the Payments Security Task Force estimates some 575 million cards will feature chips by that time.

Even though the new cards will begin making their way into consumers’ wallets shortly, retailers need to get up to speed on implementing the technology that reads the cards at the checkout line.

So far, Wal-Mart is the only major retailer that has invested in chip terminals on a large scale. The chip terminals can cost up to $1,000 apiece, according to Javelin Research. American Express has pledged $10 million to help small businesses upgrade their terminals.

InsuranceNewsNet has been reporting on the dangers that data breaches are bringing on our economy. For more on this subject, read Steve Morelli’s post, “Why Cyberthreats Are Eroding Our Lives.”

I had a chat with my banker about this while we were in the process of sorting out yet another situation caused by yet another data breach. He mentioned that the banking industry and the retail industry have been at odds over who will be responsible for shouldering the cost of changing the technology in the plastic that consumers use every day. I told him that I didn’t think it really mattered whether the banks pay for updating card technology or whether the retailers foot the bill. In the long run, the consumers will end up paying for everything.

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Susan Rupe is assistant editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Connect with Susan →

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