CREDIT CARD FRAUD: What is chip-and-PIN technology? - KMSP-TV

CREDIT CARD FRAUD: What is chip-and-PIN technology?

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Smart chip technology is a concept floating around amid news of user data fraud, but it may not be the ultimate panacea.

Security experts told Fox 9 News the technology that uses an embedded chip is a step in the right direction, but far from bulletproof.

Smart cards, chip cards or EMV-based credit cards are all different names for the technology. Experts say these cards are only going to give the holder about two extra layers of protection when physically buying something at a store even though smart chips are harder and more expensive for hackers to replicate.

Target is expected to drop 100 million dollars to implement the card system in effort to protect against cyber theft.

"Payment cards are a form of identity and the smart card provides a higher level of security when it comes to protecting your identity," Ray Wizbowski with Minnetonka-based Data Card Group said.

Data Card Group manufactures the chip cards globally. The hip is said to make a key difference in replacing the magnetic strip cards at the point of sale.

"It's difficult to prepare the data in a way that the [point-of-sale] terminal can understand that data, so it makes it difficult for that data to be used," Wizbowski said.

On top of the complex encryption, smart card users are required to enter a pin every time they swipe.

"It's harder to clone and it's more expensive for the criminals to replicate," Scott Larson, president of arson Security, LLC said.

Former FBI agent-turned security expert Scott Larson admits the card aids with security, yet the extra layers of protection, he says, is where the technology's vulnerability lies.

"Every security apparatus has a weakness, the weakest link in this case it's the pin and how it's encrypted and both researchers at Cambridge other security researchers were able to fake the pin and use the cards," Larson said.

On top of that, the chip card does nothing to protect online or over-the-phone shoppers, especially because replacing the ubiquitous magnetic strip system in our country is surely going to cost a pretty penny.

This infrastructure would mean new cards and chip-based point-of-sale terminals.

Some argue because other countries have been running chip cards for more than 20 years, adopting this technology on a massive scale would really just mean the U.S. finally adhering to global standards.

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