Tuesday, September 30, 2014

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Chip and PIN Cards May Be the Answer to Security Breaches

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TWC News: Chip and PIN Cards May Be the Answer to Security Breaches
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After the security breaches at major retailers in 2013, some security experts say the solution may be chip and PIN cards. NY1's Tara Lynn Wagner filed the following "Money Matters" report.

This month, lawmakers on Capitol Hill held hearings to examine widespread security breaches at major retailers like Target and Neiman Marcus.

"We must ensure that breaches like these do not become the new norm," says Rep. Lee Terry of Nebraska.

Unfortunately, it may be too late. A representative from the security company Symantec told the Senate committee that more than 435 million people had their identities exposed due to data breaches in 2013 alone.

Part of the problem is that the credit card technology used in this country has long been outdated. Adam Levin of Identity Theft 911 says one step toward greater protection would be the adoption of chip and PIN cards.

"The data is actually stored on a microchip that's on the credit card, and that you would also need to use a PIN," Levin says.

One benefit is that unlike with a magnetic strip, the information on chip and PIN cards is encrypted.

"So the credit card information would stay encrypted longer and it would make it much more difficult for the hackers to be able to obtain that information," says Fran Rosch of Symantec.

Chip and PIN cards are also harder to counterfeit, and they require two-factor authentication, meaning that you have to have the card and know the PIN number.

"So the combination of those two things, plus the other elements, make it much more secure than the current technology that we're using, which is really 1960s technology to fight a 2014 fraud," Levin says.

Chip and PIN cards are now being used in roughly 130 countries, but switching here will be costly, both for the retailers, who will have to replace their card readers, and for the credit card companies, who will have to produce the new, more expensive cards.

Change is coming, though. Both MasterCard and Visa have set a deadline for October 2015, and Target plans to start even sooner. Chief financial officer John Mulligan told Congress that the company will spend $100 million to have chip and PIN technology in place at their stores and in their own REDcards by early next year.

Still, Levin says that chip and PIN cards aren't a silver bullet.

"It can't help you for online transactions. It really only works if there's a card reader involved," says Levin.

It also doesn't solve the problem of debit card breaches, which can take a lot longer to correct and get your money back.

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