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Financial Payments

  1. Fraud in the credit card system accounts for higher rates and interexchange fees between banks/credit card issuers and merchants. (GAO-08-558 Credit and Debit Cards pg. 22-24)
  2. Reducing fraud in the credit card/ payment system is critical to consumers because they bear the brunt of the cost (both in terms of cost to clean-up the fraud on their accounts and the increased costs of products and good passed along by the banks to merchants and ultimately to the customers).
  3. Credit card/payment systems around the world are moving to the Chip and Pin process to combat the skyrocketing cost of fraud. Because there is more security in the Chip and Pin system, in countries where it has been deployed, banks are able to offer low interchange rates to merchants. (Press Release, Reserve Bank of Australia, Credit Card Benchmark Calculation, September 29, 2006. + Smart Card Allianc.Fraud in the US Payment Industry: Fraud Mitigation and Prevention Measures in Use and Chip Card Technology Impact on Fraud. September 2009)
  4. Currently every major country and region in the world including Europe, Asia, South America and North America (except the US) is implementing Chip and Pin to prevent fraud. As a result fraudsters will move to regions of the world that are less secure. Because of our massive economic wealth the US is the primary target. (Smart Card Alliance. Fraud in the US Payment Industry: Fraud Mitigation and Prevention Measures in Use and Chip Card Technology Impact on Fraud. September 2009)
  5. Over the next year International travelers will find themselves unable to use their credit cards overseas because they do not include the Chip and Pin capability. This presents a significant problem for the interoperability of the credit card system and puts US traveler at a disadvantage because they have been issued credit cards that no longer meet the minimum standards for security in seven of the top ten most visited countries. (Johnson, Allie. www.creditcards.com. US credit Cards Becoming Outdated, Less Usable Abroad.October 2, 2008. http://www.creditcards.com/credit-card-news/credit-card-magnetic-stripe-ban-europe-1273.php?aid=2741cce8&rss_lnk=25 [access on Sept 23, 2009]
  6. When asked about moving to a Chip and Pin solution in the U.S. the banks/credit card issuers say it would be too difficult to get the merchant community (which is very unhappy about interexchange rates already) to pay for the new terminals that would be required to read the new chip based cards.
  7. When the merchant community is asked about moving to Chip and Pin they indicate it is not their fault (and they should not be required to pay) that the banks are issuing a generation old technology.
  8. Fraud in this debate is the 800lb gorilla in the room that neither side wants to discuss. As evident by the fact that the credit card companies do not release the numbers on fraud each year. (September 14, 2009 Senate Homeland Security and Government Affairs Committee Hearing- “Cyber Attacks: Protecting Industry Against Growing Threats “)
  9. For the merchants the consequences have multiplied when the discovery and ultimate public disclosure of fraudulent activity was made public. When TJX Co. reported the data breech in March 2007, of 44 million credit and debit card numbers, the loss of the company snowballed into the millions of lost shoppers. (US Senate Homeland Security and Government Affairs Committee- Cyber Attacks: Protecting Industry Against Growing Treats, Sept 14, 2009 and Greenemeier, Larry. T.J. Maxx Data Breach is Worst Ever. March 29, 2009. Information Week, www.informationweek.com [accessed September 22, 2009)
  10. U.S. consumers spend more than any other consumers on the planet, approximately nine and a half trillion dollars. (Business Exchange- http://bx.businessweek.com/consumer-spending/?lid=gAC092109A12346&src=sem&dom=goo&adgrp=GST_3578_BUSW_US_PRD_Consumer_Spending&adID=sgAC092109A12346_4007340072_krmw10a0g0&kw=Consumer%20spending%202009)
  11. Our financial system makes billion of dollars each year from these transactions. The financial system in the U.S. has received extensive tax payer funds in the last year; Congress authorized $700 billion in TARP funding alone, while at the same time, fraud cost US Consumers $48 billion. (FederalReserve.gov; creditcards.com).
  12. Is it too much to ask that they take every step necessary to prevent fraud and protect U.S. consumer’s personal information by implementing secure technology.
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