By Naomi Dolin-Aubertin
Once upon a time, we were a cash economy. Now credit is the name of the game. But as we've seen and discussed frequently, credit card fraud is on the rise. It seems every week brings a new story of a large retail institution being hacked. A large part of the problem stems from the current point-of-sale (POS) systems. They rely on cards that store information in the magnetic strip on the back and the customer's signature. However, as anyone who has written "Please see ID" in the signature space on the back of the card knows, it is the rare person who actually asks for an ID. The problem with these types of cards and point-of-sale systems is that it is extremely easy to steal someone's information. It is even possible to steal someone's PIN by using handheld infrared imaging systems that work on smartphones!
However, there are several technologies recently looking to change how we pay. One is Apple Pay, which launches next week. Apple Pay stores the credit card information on a dedicated chip, which not only encrypts the data, but uses a randomly-generated, one-time number to pay. That way, even if the point-of-sale system is compromised, the number the hackers receives isn't your credit card number and it isn't good for any other transactions. Additionally, they will require retailers to update to short-range contact-less card readers.
MasterCard also announced a new way to pay this week. Cards with built-in fingerprint identification will be coming in 2015. These, like Apple Pay, will also work with contact-less card readers. The card user will be able to present the card for payment with their finger on the sensor. Not only will this eliminate the need to punch in a pin code or sign their name, it will also prohibit any other person from using the card.
Other parts of the world have long ceased to use cards with magnetic chips and signatures. Instead, they rely on cards with embedded chips and PIN codes. Unfortunately, the technology is more expensive to implement and requires a refresh of all point-of-sale terminals, making both credit card companies and retailers in the States reluctant to adopt it.
However, the last few years has demonstrated that as an economy we can no longer fail to adapt how we pay, or we will continue to pay the price in mass data breaches and stolen credit card information. With Apple Pay, mobile pay, PINs, and MasterCard's new fingerprint sensor, we are slowly feeling our way away from the magnetic strips and signatures of the past.