Get that chip off your shoulder and put it on your credit card

Today the Canadian trials of chip technology held at Kitchener-Waterloo in Ontario come to a close – and the participants are ecstatic. But is chip technology really as secure as it's made out to be? Read on...
10/31/2008 8:00:00 AM By: Kavita Gosyne

Chip-enabled credit and debit cards will almost entirely replace magnetic strip cards within the next five years – perhaps sooner, e-payment experts say.

Vastly improved security will be the most tangible impact of this transition, they say.

Magnetic strip cards used today have certain inherent weaknesses.

Criminals can today steal the magnetic stripe data, copy it on to a counterfeit card and put any signature on the back of the fraudulent card.

Chip and pin technology can minimize such fraud, says Sameer Mustafa, assistant professor, department of accountancy at Montreal's Concordia University.

Knowing the account information and personal password aren't enough to access a bank account, he says. "The physical presence of the chip is needed."

While chip-based systems have been used in Europe since 2005, in Canada the technology is just gathering momentum.

Today's there's growing awareness of its benefits thanks to the efforts of companies such as MasterCard Canada, Desjardins Group, Visa Canada, and the Interac Association – organizations that participated in the Kitchener-Waterloo chip trial that started last year. The trial officially ends today (October 31, 2008).

The transition to chips is a "global movement," notes Caroline Hubberstey, director of public affairs at Interac Association. She says markets that are left behind put themselves at risk as "fraud migrates to the weakest point."

Interac announced its Canada-wide rollout of chip technology this week.

"We didn't want Canada to be at risk," Hubberstey said.

Countries adopting chip technology for e-payments witness a huge decrease in "skimming," according to François Labrie, project director at Desjardin Group headquartered in Quebec.

A common fraud associated with e-payments, skimming refers to the practice of recording information – such as a PIN number – entered by customers through a device placed in the shop's card reader.

Typically, fraudsters steal the card reader from the shop (or obtain it in collusion with a staff member), install the device, and then put the reader back in the shop, supermarket, or gas station.

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