In Part 1 I covered how & what made the US credit cards so vulnerable to fraud. More info at the link below
(http://levelnineatwork.blogspot.com/2014/05/end-of-just-swipe-it-credit-cards-part-1.html)
Below are some factors affecting the adoption of new system.
One of the problems faced in a scenario between the bank, the merchant & the fraudster is the liability carried by each person.
The Wall Street Journal reports that "with the adoption of the new system with chip and PINs, if a merchant is still using the old system, they can still run a transaction with a swipe and a signature. But they will be liable for any fraudulent transactions if the customer has a chip card. And the same goes the other way – if the merchant has a new terminal, but the bank hasn’t issued a chip and PIN card to the customer, the bank would be liable."
Source:- blogs.wsj.com
With this structure in place, banks will improve their pace to replace old Credit Cards with new cards to prevent fraudulent liabilities while at the same time promoting merchants to change to the new systems which I believe will work faster if incentives to the merchants are factored in as well
DURBIN AMENDMENTS
Two key factors in Durbin Amendments affecting the adoption of new systems as explained by Nerd Wallet are existing "Gas stations, small restaurants and small business owners pay the highest fees, while big box retailers like Walmart and Safeway are able to negotiate lower prices" and this did not went well with SMEs operating on thin profit margins
The Durbin Amendment, passed as part of the Dodd-Frank financial reform legislation in 2010, required the Federal Reserve to limit fees charged to retailers for debit card processing. (Wikipedia 2014)
The was also the network exclusiveness which only allows certain card type to be processed over certain networks which the Durbin Amendments amended to "Each network must be able to be processed on two independent networks, one for signature debit and one for PIN."
Source:-http://www.nerdwallet.com/
VIEWS
Other parts of the world are already adopting contactless payments with info stored on your card & phones by simply tapping against the reader. How fast will US banks and fraudsters react towards these changes?
As this technology evolves and broadens, it creates different scenarios requiring different usage of devices and interaction methods that makes the most sense without compromising security.
