We were very interested to see a report from Aite Group that dug into the issue of why banks are issuing new secure EMV chip cards without requiring the use of a Personal Identification Number or “PIN” for all payment transactions.
The report showed that the cost of requiring PIN in the U.S. would be enormous, especially compared to the much smaller risk of lost and stolen fraud which is the type of fraud PINs would address.
The implementation cost for requiring PIN on all transactions is estimated to top $2.6 billion for issuers and $4.5 billion for merchants. That’s more than $7 billion in costs. Meanwhile, Aite reports that the fraud prevention opportunity for lost and stolen fraud, for which banks and credit unions remain liable, is about $852 million over five years. Aite’s senior analyst Thad Peterson says, "With very little incremental risk for merchants and significant expense and implementation challenge for the payment ecosystem, it is difficult to justify a mandate to implement PIN as a credit card verification method.”
It’s good to see new data inform the debate, but at least from Visa’s perspective, our focus has always been on enabling chip technology for as many cards and merchants as possible. Chip, in and of itself, regardless of signature or PIN, addresses the largest segment of fraud in stores – counterfeit cards.
That is why when we laid out a plan and timeline in 2011 to encourage issuers and merchants to adopt chip technology, we provided them the choice to implement PIN as well without requiring it and without setting additional liability for merchants if they choose not to. Looking ahead we see emerging technologies that better verify account holders than either signature or PIN. Already, we see biometrics in mobile payment options such as Touch ID for Apple Pay, making the shopping experience more convenient and more secure than entering a PIN which can be forgotten, skimmed, or compromised.
Given the numbers, the industry would be better served investing some of the $7 billion that would be needed to require PINs into accelerating the adoption of chip and smarter technologies of the future that will make more of a difference in security and fraud prevention in the long term.