It is now 10 years since Chip and PIN became the gold standard of authentication for face to face transactions. Chip & PIN, refers to cards which use the EMV protocol. Payment data is stored on an integrated circuit (the chip) rather than the traditional magnetic strips, making the cards near impossible to clone. Its ease of use and proven effectiveness in combating card fraud has made it central component of our payments experience.
This key feature on today’s payment and banking processes was first tested back in 2003. Barclaycard launched the cards in Northampton, the biggest trial of chip & PIN cards in the world, and became the first to launch this service in the UK. But it wasn’t until 2004 that it was introduced to the wider public and only in February 2006 did all transactions became mandatory chip & PIN compliant.
The introduction of chip & PIN went against the traditional system of signing on paper to authorise a payment. It was developed to speed up the point-of-sale payment process and increase security by combating the rising levels of counterfeit and stolen card fraud in the UK.
Consumers in the UK were receptive to the technology and by the end of 2006, 130 million chip & PIN cards had been issued. More consumers became confident in making card payments, and more retailers confident in accepting them. As a result, consumer spending using cards soared, increasing from 55% in 2006 to 78.5% in December 2015.
Chip & PIN was very successful in reducing card present fraud from day one; in its first year fraud was reduced by 13%. These reductions have further continued with counterfeit card losses down from £129.7 million in 2004 to £47.8 million in 2014.
The simplicity of the technology is undoubtedly the key to its successful adoption and the prevention of billions of pounds of fraud related losses in the UK in the last 10 years. The technology gives card-holders peace of mind, as they know their money will be better protected, even if their cards are lost or stolen.
However, while a fraudster may not be able to use a stolen card to withdraw cash from ATMs or to pay for goods in store without PIN, today they can still use it to make purchases online. Online card transactions still have minimal levels of security, with measures such as 3DSecure easily bypassed using only the information found on the card.
Card-not-present (CNP) fraud is a large and an on-going problem for the payments industry, increasing by over 120% since 2004. Many have attempted complicated and disruptive solutions to combat this problem but enhancing the customer experience has to be a key driver of adoption. .
In a recent customer study on payments, almost 90% of customers confirmed the affinity for PIN. It is viewed as a good tool that puts consumer in control of their transaction, giving them peace of mind and an additional level of security and convenience. . Through enabling multi-channel and multi-factor authentication via the Cardholder PIN, MYPINPAD tackles some of the challenges facing the huge growth in digital payments. It enables some of the sustainable consumer facing benefits of chip & PIN via online transactions – convenience, simplicity and familiarity.
More details on the Mobile PIN authentication survey can be read here.