This month Lieberman Software joined the Smartcard Alliance, a nonprofit organization whose mission is to accelerate the adoption of smart card technology in North America. Current alliance members include the nation’s thought leaders in IT, finance and the federal government.
In reality, the fundamental goal of the Alliance is to bring US payment card protections up to the standards of the rest of the developed world. According to an Alliance report, payment card issuers who have implemented smart cards in Europe, Latin America, Canada and Asia Pacific report significant reductions in fraud. The results include lower incidents of Card Not Present (CNP), card cloning, and lost and stolen payment card fraud.
How It Works
Here’s how the technology works: Smart Cards generate unique one-time only responses to financial transaction requests from the banks that issue the cards, so the data stolen would no longer be valid. The cards are also locked with a PIN code, so even the physical loss of cards is a non-event. The data transmitted should be encrypted, but this is not a requirement because the data stream is only good for one transaction. Attempts to use the same data a second time simply do not work.
Sadly, this solution is not yet available to American consumers, merchants and payment card processors because the card issuers are not mandated by the US government to implement it. In our country a set of conflicting corporate agendas – and the disproportionate power of the card issuers – allows insecure payment card technologies to linger, far beyond their useful lives. US card issuers, who could be in a position to implement technologies that are proven to eliminate fraud, fail to do so because they can simply transfer the liability for credit card fraud losses to merchants and processers.
Giant Step Forward
The US can take a giant step forward by mandating Smart Card technology for all payment card transactions. Second, we must transfer the liability back to the credit card issuers unless the merchant or processor is found culpable by a court of law. As with other industries it’s time to let due process– instead of powerful card issuers– determine culpability and fines.
Were the US government to mandate that credit card issuers are now responsible for losses that occur as the result of issuers’ outdated technology, you can bet that Smart Cards will gain an immediate foothold and billions of dollars in fraud will be eliminated almost overnight.
Until this happens the headlines will continue to be full of stories about merchants, processors, and consumers who face ruinous losses at the hands of thieves.
What do you think – is it time for the US to adopt smartcard technology? Leave a comment below. You can also follow us on Twitter: @liebsoft.