Carpadium Consulting

There are a few agencies reporting today on the news that Visa is mandating that credit cards will need to be chip-and-pin enabled by 2013.

While it’s obviously a good thing to improve card security, Australia actually has pretty low card fraud by World standards (although it is on the rise, and in some areas more than others). Because of these relatively low levels of fraud, our Banks have been a little slow to fully roll out new security measures. What has been standard in the UK for some years is only now just becoming standard in Australia. The reason for this is simple: Banks only ever spend on fraud reduction an amount less than they are losing in fraud.

What I find particularly interesting about this announcement is that it won’t really do too much to stop one of the main pain points: card-not-present fraud. Chips are great when you have a chip reader at the point of sale, but they don’t do too much when you don’t. The obvious example of card-not-present transactions is Internet commerce. Chip cards don’t help much to stop fraud here, unless you have some extra countermeasures. And that starts to get a little tricky in terms of cost, and not least of all in terms of the end user’s experience.

So, while this is a good step forward, it’s definitely not a panacea for all credit card security.

M@