Credit card with chip takes aim at fraud

Cashiers would no longer swipe debit cards in new system

VICTORIA -- A major shift in how debit and credit cards are used is taking shape across the country.

Canada's financial institutions have started to switch from the traditional "swipeable" card with a magnetic strip to a new card design incorporating a tiny computer chip. Customers are being asked to insert their card into a point-of-sale reader and typing in a code, instead of giving the card to a cashier to be swiped and then signing a receipt.

The change is intended to reduce the $300 million incurred annually in debit- and credit-card fraud in Canada. Card issuers have started offering the chip cards to customers across the country, with the expectation the cards will be in wide use by the end of 2010.

"It's excellent that they are doing something; credit-card fraud and chargebacks are an ongoing problem," said Kate Phoenix, vice-president of marketing and sales with Rogers' Chocolates. "When there is fraud or a chargeback the full cost is borne by the vendor -- when there is a false charge the banks credit the person, but they take it back from us."

Instead of swiping their card, customers will insert it into a reading device where it will remain until the end of the transaction. Like debit-card customers, credit-card users will also punch in a personal identification number and no longer have to sign a sales slip.

The director of payment system risk for Visa Canada said chip cards are typically being issued when old ones expire.

"We're very much at the start of all this," Gord Jamieson said.

"There's a low percentage of cards out there now, with volumes in the 85 to 90 per cent range expected by October 2010."

In addition to better security, the new cards should also cut checkout lineups. "It's actually a faster transaction," said Jamieson.

News Source : http://www.canada.com/