Visa addresses security concerns with smart chips

Payment processors and banks are on side; now it’s time for federal and provincial governments to join the ranks in preventing fraud through the use of smart chip technology, an advocate of identity protection says.

This week Visa Canada

announced it will change all of its branded credit cards in Canada from magnetic stripe to cards with smart chips containing a microcomputer. By moving to chip technology, Visa says security options will move from signature to PIN number. This will allow for information on the card to be encrypted, lowering the chance of fraud.

Catherine Johnston, president of the Advanced Card Technology Association of Canada (ACT), said there can be no more excuses from government that smart card technology isn’t becoming the common solution in the protection against identity fraud. At a seminar on the subject last year, for example, Canada’s CIO Michelle D’Auray said technology and acceptance issues have kept the government from developing a smart card strategy.

“”In the past, this technology has been accused of being a solution looking for a problem and clearly now, the problem is identity theft,”” Johnston said. “”But we’re seeing it not just in this kind of move where a payment product is going to be protected substantially from counterfeiting, but in initiatives worldwide with governments and discussions that are taking place with our own government in terms of identity theft.””

Johnston will be in Ottawa Thursday speaking to 15 different ministries about the possibilities of smart card technology in preventing identity fraud. She said one of the questions will be “”how do individual groups work on something that really needs to be a government-wide initiative? I have lots of suggestions,”” she said.

Visa cardholders will be able to use their cards to make more personal decisions such as setting spending limits and approving or declining transactions offline.

Allen Wright, director, emerging technologies and chip initiatives with Visa Canada, said consumers can expect to see the card rolled out and technology ready to accept them in the “”mid-term”” of a seven-year rollout, depending on the issuer.

Wright says the move by Visa follows standards set up by Europay, Mastercard and Visa (EMV) which decided in the 1990s that in order to deal with fraud globally the card issuers would migrate each of their credit cards to chip technology. it will be up to the individual issuers to decide how far they extend the card’s abilities and when, but it can accommodate things such as reward programs and even public transit passes.

However, while Visa says that every one of its cards in Canada will feature chip technology and most merchants will have the equipment to accept the cards, it may be some time before consumers realize the benefits of the cards.

On Wednesday Paymentech Canada announced it would begin work on making microchip transaction processing technology available to Canadian merchants.

In terms of reducing fraud, Wright says it is expected to drastically reduce the amount of money currently lost to banks through credit card counterfeiting. He points to France as an example of what can be achieved with smart card technology. All Visa cards in France have been equipped with smart chip technology since 1992.

“”In France, it has served to reduce loss to fraud to less than three basis points,”” he said.

According to the Canadian Bankers Association, Visa and Mastercard last year wrote off more than $128 million in fraudulent credit card accounts and 136,500 cards were used fraudulently.

The Visa announcement comes just months after the Royal Bank launched its Visa Avion Platinum microchip card in March to exclusive clients who travel extensively. A Royal Bank spokesperson said the Avion card’s use has been tracked around the world from Brazil to Denmark. And while it was originally expected to be used overseas only, purchases have also been tracked to Target stores in the U.S. Johnston said some retailers have taken it upon themselves to purchase point of sale technology to enable the card’s ability.

The Canadian Imperial Bank of Commerce also issued its Entourage American Express smart chip card more than a year ago, offering secure online shopping, and Mastercard says it is committed to smart card technology, with 127 million cards worldwide. But Mastercard says it is working on migration according to “”when and where it makes sense”” for local requirements.

While Visa has taken a substantial step, Johnston said, the next question is how soon will federal and provincial government — all of who issue various forms of identification — will fall in line with global initiatives.

According to ACT, the passport office has taken a proactive stance because of work done by Montreal-based International Civil Aviation Organization which sets standards for travel documents for 180 countries around the world. In April, the Ministry of Immigration admitted it was discussing a biometric identification card. Other potential projects include a chip-enabled firearms registration card.

“”We will soon be moving to more secure passports to help combat ID theft,”” Johnston said.



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Jim Love, Chief Content Officer, IT World Canada

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