Bank of America is the first bank in the US to offer chips on debit cards that change card information with each transaction to prevent card replication and fraud
Bank of America is the first bank to issue debit cards in the Unites States with chip technology (EMV cards) to better protect the cardholder's identity and prevent card replication.
Bank of America has been offering chips on credit cards since 2012 but after their decision to make it an option on debit cards other financial institutions are likely to follow in their footsteps.
The chip acts as the magnetic strip normally on cards and uses a pin number that when verified allows for a transaction to take place.
Paving the way: Bank of America is the first bank to put chips on credit cards as oppose to magnetic strips and other financial institutions are likely to follow
Replaces the strip: The chip has as the same data at the magnetic strip but it encrypts and changes card information with each transaction making it difficult for people to replicate the cards
Market Watch reports that each time the card is used the transaction information changes making it difficult to copy the card.
The card encrypts transaction information each time the card is used, explains Bizjournals.com.
'The chips are much harder for criminals to replicate than the magnetic strip is,' said John Kiernan, senior analyst at Evolution Finance.
The new chip technology is expected to become the security standard for all U.S. credit cards and merchants will have to update their payment terminals to allow for the new technology.
Visa and MasterCard have given merchants and card issuers an October 1015 deadline to allow for the new technology.
If merchants don't comply, credit card companies have threatened to pass fraud liability to the stores themselves which can be very expensive.
Merchants will have to pay around $1,000 to update their machines to allow for the EMV cards.
'It’s not anything you need to rush out right now and get,' said Kiernan.
'They will be more impactful when merchants get the new terminal.'
Fraud doesn't affect consumers or credit card companies as much at it affects stores like target and Home Depot who were the recent victims of mass data breaches.
Even though the chip doesn't do much to prevent credit card fraud, it will make it harder for people to duplicate the card.
'Chip technology is an important tool in increasing card security, and we want our customers to have the best possible experience when using their payment cards,; said Titi Cole, retail products and underwriting executive for Bank of America to Bizjournals.com.
'The new chip-enabled debit cards will improve security of customers’ transactions when traveling abroad and at home as more U.S. merchants adopt chip technology,' she added.
The Federal Reserve data shows that credit card and debit card fraud impacts around one per cent of all purchases made. That's an estimated $11.27 billion in losses.
Benefits: Having chips on cards will prevent fraud during international travel and in the U.S. as soon as merchants adapt their system to allow the cards