Attorneys General push for faster EMV adoption

Eight states and the District of Columbia are lobbying major credit card companies to rollout more secure credit cards on a faster basis. They are also arguing that in-person purchases should require PINs rather than signatures for authorization. From Government Technology magazine:

(TNS) -- Connecticut State Attorney General George Jepsen announced Monday that he is urging major credit-card processors nationwide to roll out new technology as soon as possible to help reduce data breaches affecting consumers.

Jepsen and eight other attorneys general from across the nation said in a letter Monday to companies including MasterCard, Visa, Discover Financial Services and Bank of America that they would like to see chip and PIN technology implementation speeded up. These technologies are considered to be more secure than the magnetic-stripe methods normally employed for credit cards as well as the chip-and-signature Europay, MasterCard and Visa specifications currently being implemented. 

"Over the last few years, breaches at major retailers that involved credit and debit card information have really shown a giant spotlight at the inherent weakness and vulnerability of magnetic strip cards even when the cards are lost or stolen," Jepsen said in a statement. The attorneys general said local businesses face financial and reputational risks stemming from loss of consumer trust after breaches.

Jepsen said other countries have proven the advantages of chip-and-PIN cards. "Consumers in Connecticut and across the country deserve access to the absolute best that the industry has to offer," Jepsen said. "Right now, that is chip and PIN, and I believe it's my responsibility to advocate on their behalf for it." 

Unfortunately, according to Jepsen, most U.S. chip cards rely on signatures rather than PINs, and these are easier to forge or copy...

My opinion is that faster implementation would be easier said than done. While the credit card companies have been and could continue issuing cards with chips, the bigger backlog is in merchants obtaining certified, validated hardware to read the chip and PIN data, and then to have that data transmitted or imported into their accounts receivable software.

Government agencies may "wait to see what happens" with EMV technology before upgrading systems

As credit card acceptance begins changing from magnetic stripe reading to chip-and-PIN transactions at retailers nationwide, a prominent e-government payment provider is advising government offices to wait before rolling out new systems. NIC Services says that government entities generally experience less fraudulent payments than the private sector, and that government merchants can sit on the sidelines unless particular agencies have experienced high rates of fraud or chargebacks. From Government Technology magazine on October 2: 

...As for whether government should rush to make the switch, Mukesh Patel, president of NIC Services, told Government Technology in July that his company is recommending that its public-sector partners analyze their history of chargebacks and fraudulent transactions, and then make a business decision as to whether it’s beneficial to invest heavily in the terminals.

“Just from our experience, with the 28 to 30 states we work with, government services in general don’t tend to have a high fraudulence rate," he said, "because as a citizen you wouldn’t go to your DMV and renew your own driver’s license with a stolen card. It would be very easy to find out who you are.” 

NIC’s recommendation is that unless an office encounters a high incidence of payment card fraud, they should wait to see what happens in the industry...

Local governments weigh chip-and-PIN options

The new computer chips in consumers’ credit cards don’t just affect how retailers accept payments, but how government agencies accept credit card payments for fees, taxes, and merchandise. As of this month, if a consumer presents a card with a chip to a merchant (either private or public sector) and the merchant is only capable of reading the magnetic strip rather than the chip, then the merchant accepts the liability if fraud results from that transaction. An industry expert has written a piece in American City & County’s blog about how this shift in liability affects local governments: 

…City and county governments have several options for how they respond to the October deadline.

Deadline is not a mandate

Although the deadline shifts responsibility for fraudulent credit card charges from the card issuer to merchants that haven’t begun accepting chip cards, state and municipal governments are not required to have EMV-capable point-of-purchase terminals installed by Oct. 1. Credit card companies’ switch to microchipped cards will be only about 70 percent complete by year-end, according to CreditCard.com, and the new cards will include magnetic strips as well as chips, so agencies’ existing point-of-sale terminals will remain viable for the foreseeable future. There is still plenty of time for city and county governments to research the issue and determine what timing is best for them to convert to new EMV card devices. 

Cost could be an issue 

In part, that decision involves evaluating how quickly budgets allow for an equipment upgrade. Basic EMV-capable pay terminals start at around $200 each and go up from there, so purchasing and installing new equipment can represent a substantial capital expense. Further, EMV conversion is more complex than simply unplugging a current card reader and replacing it with a new one. The transition requires new back-end code and a certification process that can take several months…

Federal government promises chip-enabled payment acceptance

Most credit cards in the U.S. have been replaced this year or will be replaced next year with cards that contain a special chip. Retailers are in the process of upgrading payment terminals to accept payments on these newer cards with entry of a PIN by the customer.  The private sector is generally ahead of government entities in adoption of the new chip-and-PIN (also known as EMV) technology, but the Obama administration has announced that federal agencies will begin accepting EMV payments soon.

Specifically, the White House says any new "retail payment card terminals at federal agency facilities" must be chip enabled beginning January 1, 2015.  I'm not sure what exactly this would include, and whether any federal facilities in the Atlanta area accept retail-style credit card payments. To the best of my knowledge, the Internal Revenue Service does not accept credit card payments for income taxes.  The IRS accepts checks, electronic checks, and (according to their website) they accept cash payments with exact change at their two Atlanta-area offices. Perhaps gift shops at national parks would be included.

No EMV directives have come from the governor's office for state agency payment acceptance, and there is no requirement yet for cities or counties in Georgia to accept payments using EMV-enabled terminals.  In October 2015, merchants including government entities that accept credit card payments will face greater liability in the event of credit card fraud committed as a result of credit card transactions made at terminals that aren't chip-and-PIN enabled.

Locally, Kroger has already installed the hardware necessary to accept EMV cards, but won't have the software ready to make it work until next year. Reportedly, Target, Walmart, Home Depot, and Walgreens will be able to accept chip and PIN payments in or before January 2015.