EMV Credit Cards Interview with WLW Radio Cincinnati
CreditCards.com Senior Industry Analyst Matt Schulz spoke on Thursday, October 1, 2015 with Gary Jeff Walker of WLW Radio Cincinnati about the September 2015 EMV Credit Cards survey. The interview and transcript are below.
Gary Jeff Walker: Today is the day. You may not be aware of this. I wasn’t aware of it until I saw the news story and said, “We gotta talk to somebody about this” and that is today is the day that you’re supposed to be using your new credit cards that have the chip in them. It’s called EMV cards. They have a microchip inside this thing and instead of swiping the magnetic strip and exposing yourself to hackers and stolen information and data. It’s more secure to simply wave the card in front of the device and then use a pin number. I believe that’s how that works. Matt Schulz is with CreditCards.com to tell us more about this. Matt, good morning.
Matt Schulz: Good morning.
Walker: How many people actually have this? In my wallet I still have the old magnetic strip ones – Discover, Amex never sent me new replacement cards.
Schulz: Well, most people are in the same boat that you are. We did a survey and we found that only about four in 10 American credit cardholders have one of these new chip cards, but what’s also interesting is that the percentage of retailers that can actually handle the cards is smaller than that. So we still got a long way to go.
Walker: Yeah, obviously, too. Six in 10 cardholders don’t have a chip-enabled card, but how many businesses are set up to handle these chip-enabled EMV cards?
Schulz: It’s anywhere from about 10% to about 20% so it’s a really small number. The big boys like Walmart, Home Depot, Target probably are set up, but the mom and pop shop on the corner probably are not and won’t be for awhile.
Walker: And that’s the thing, too. And how does that work, how is this driven? Because it’s not something that’s mandated by any federal institution. This is a voluntary system that’s gone into place, too, and therefore it’s going to move a lot slower.
Schulz: Yeah, it’s not a governmental thing, but it’s being mandated by the four big credit card networks – Visa, MasterCard, Amex, and Discover, who are basically telling merchants you have to upgrade your terminals by October 1, 2015 – today – or you will be potentially liable for credit card fraud losses going forward. So that’s a big stick for them to carry.
Walker: So the onus is on the small business person? The business, now obviously if you’re Home Depot, Lowes, the big boys, Target, things like that – you can absorb those costs, but if you’re a convenience store that accepts credit cards, that’s a different issue entirely?
Schulz: Yeah because you’re talking about terminals that cost anywhere from $200 to maybe $1,000 apiece? Then also the man power of training your employees and making sure that they’re equipped to lead the customers through the process.
Walker: And as far as security goes are we hearing reports of – I guess maybe the way to look at it is how much has the threat or the actual cases of credit card theft, data information theft and mining gone down with the implementation of the EMV cards?
Schulz: Around the world we’ve seen a decrease in fraud committed by people who actually have a card. One of the troubling things we’ve seen is that online fraud has actually increased a lot of times because the bad guys shift from one low hanging fruit to another.
Walker: Now how do I do something online, for example? Do I have to enter my PIN number also or just give them the credit card number?
Schulz: Well, that’s one of the flaws of this whole EMV thing is that it doesn’t really impact online buying. Because the chip in the card is never triggered.
Walker: So you have to do it the manual-it won’t affect your online buying. You still enter your number and your expiration date and the like and make your purchase that way, but in person you go to a restaurant or wherever it might be, you then use this card – what does the device look like?
Schulz: The device will look like – it’s not too dissimilar from the old terminals. It will still have something where you can swipe if you don’t have a chip card, but it will also have a little slot at the bottom of it where you insert the card and leave it there for a little while, while you either sign or enter your PIN. Then once the transactions done, you take it and go on your way.
Walker: Alright so instead of a magnetic strip in the back, the chip now replaces that and therefore the information is not able to be stolen in that regard.
Schulz: Well, and what’s interesting is that the magnetic strip will still appear on these chip cards for the foreseeable future just because of the length of time that this transition is likely to take.
Walker: Yeah, we were in Europe two years ago and these things are all over the place. Matter of fact you gotta be careful because some shops, at least in Italy where we were, didn’t have the magnetic strip there. So you know there are cases where you have your credit card, will they accept it? But if you didn’t have the chip on the back they wouldn’t take it.
Schulz: And a lot of the first people who have adopted these cards in America are international travelers because they know that they’re so necessary to have outside of the country.
Walker: We’re talking to Matt Schulz this morning from CreditCards.com regarding the chip-enabled cards. The date today, today’s the deadline and you’re supposed to have one of these things and retailers are supposed to have the EMV, chip card readers themselves. I’ve seen them at Kroger’s and other big retailers, but I suspect simply because I don’t have one in my wallet yet that a lot of retailers don’t have the machines. The only thing that’s going to move this along, I guess, is more people, maybe small businesses getting held responsible for fraudulent charges and the like. But it doesn’t seem like this thing’s going to move anytime quickly, does it Matt?
Schulz: No, but there are things that people can do to be proactive with it. They can call their bank and ask what the situation is or they can also go to CreditCards.com. We have a page with lots of these cards available if you want to get one sooner.
Walker: Alright, very good. What about small businesses and entrepreneurs that have the Square? You know that little cube thing that you plug into the jack of your phone and you can take payments on the spot there – does it work with those?
Schulz: Square and other tools like it are definitely adjusting to these EMV chip cards. And it’s going to be a slow process with that sort of thing, but it’s definitely on the radar of companies like Square.
Walker: Who’s more likely now to get these cards shipped first? Because obviously it’s not just like, “Hey, everyone who is a Visa cardholder we’re going to just send you this thing.” I’m sure they prioritize who gets them, right?
Schulz: Yeah, the most likely people to have these cards right now are folks who are wealthier and a little higher education and generally between the ages of about 30 and 49. And that also squares with the typical profile of an international traveler and those folks were the first to get on-board over the past few years so it makes sense that you would have that demographic be pretty heavily represented.
Walker: Do you think that relatively soon the hackers are going to find a way around this? I’m pretty confident they will. There’s going to be some way they’ll be able to do this, outside of the obvious one, which is online.
Schulz: Yeah, there’s no technology that’s foolproof and there’s a whole lot of innovation going on. This is just another tool in the toolbox against fraud.
Walker: And where is the-they have like a little swiping device in their apron, some servers. I mean, I’ve heard the stories, I don’t think it’s ever happened to me, knock on wood, but it’s going to eliminate that. I can’t imagine it’s going to eliminate, you know, the old ATM where they have the fake card reader thing going on there. Are ATMs going to wind up changing, also?
Schulz: ATMs have a little more time. They have about a year before they have to change and gas stations also have about a year to change. Partially because of the increased cost involved in replacing an entire ATM or a gas station pump.
Walker: Yeah, obviously you can’t just like retrofit something on there, too. What about, I don’t know, proprietary cards, not just general credit cards. But let’s say, my wife has a Kohl’s charge card, Target card, Home Depot, Lowes, things like that. Are they going to be a little bit more slower to evolve?
Schulz: They’ll definitely be slower to evolve, but they’ll probably come. And they don’t have to adhere to this deadline because it’s a deadline from Visa, Amex, MasterCard, and Discover, so if one of those logos isn’t on your card, you don’t have as much incentive to move.
Walker: Yeah, I guess it wouldn’t be too because, I don’t know, if I go to Target if someone’s going to wind up stealing my Target card info because there’s probably only a $500 credit limit there and you can only buy stuff at Target. So there’s really no incentive, I would think, just to steal Target cards.
Schulz: There’s always incentive-
Walker: Oh yeah, less than like a general card, I guess, yeah.
Schulz: Yeah, sure. They certainly wouldn’t have as high a limit as some others would, but all card numbers are valuable to bad guys.
Walker: Plus you know, how many pairs of women’s shoes can I buy, for godsakes? Not kind of my thing there, too. Globally speaking, Matt Schulz, we’re really behind everyone else, aren’t we? And I know about Europe, but is Canada ahead of us in this regard, too?
Schulz: Yeah, we’re pretty behind the entire world. A lot of it is just a function of money and the cost of upgrading these cards, if you’re the bank, and the cost of upgrading the terminals. And the last thing in the wake of the Great Recession that anybody wanted to do was spend money on this technology that most people can’t use yet anyway.
Walker: Ok, so when I use this thing at the store, again it involves dipping in a terminal, take me through the process. Let’s say I’m going to go buy a pack of gum. Tell me how I would use my credit card to do that, how would it work?
Schulz: Sure. What you’ll do is you’ll insert your card into the slot at the bottom of the terminal and the terminal will walk you through the process. So you will probably sign just like you have with regular cards for years and years. Then once the transaction is done, the terminal will tell you please remove your card and you can go about your business. And if you do swipe a chip card in one of these new terminals, the terminal once again will lead you through the process and tell you, “Hey you’ve got a chip card, go ahead and insert it instead of swiping it.”
Walker: Ok, gotcha. And do I enter the PIN also with my signature or is that an alternative?
Schulz: It depends on what type of card that you have. Most cards in the U.S. are chip-and-signature cards so there’s not necessarily a PIN involved.
Walker: Ok, I got it – signature and PIN and swipe it and the information. Yeah, I guess that would make sense in that regard, too. I think a PIN would be a little bit more secure, but at the same time certainly not having that magnetic strip on the back, it has all that information that you don’t want getting out there. At some point I would think that the scammers are going to wind up developing some sort of mini chip reader where they’re just able to extract the information. Will that work?
Schulz: There’s always a way around technology. And there’s a whole lot of money at stake for bad guys so I’m sure they’re working on something right now like that.
Walker: Alright so if I don’t have the chip card yet, I shouldn’t be freaking out, is what you’re saying?
Schulz: Definitely not. Just give your bank a call and ask them when to expect it or go ahead and go to CreditCards.com and you can find lots of cards with these chips.
Walker: Alright, fantastic. Matt Schulz with CreditCards.com. That link’s up on the blog this morning. Matt, thanks again, I appreciate it.
Schulz: Yeah, thank you.