Chip and Pin Card Systems Essay Example | Topics and Well Written Essays - 2500 words

Chip and Pin Card Systems - Essay Example The magnetic strips required the customer to present their cards for swiping in a terminal, sign a slip of receipt and the payment would then be processed (King, 2012). However, with the introduction of chip-and-pin, the customer’s card is swiped and the details would be authenticated by entering a unique pin and the payment would be processed. Based on the introduced chip and pin cards in the United Kingdom, research is to be conducted to determine whether their introduction has really served to reduce incidences of card fraud in the United Kingdom. The main issue in this paper is whether there has been a reduction in card fraud since chip and pin cards were introduced and whether any reduction can be attributed solely to the introduction of chip and pin cards. Literature Review The shift towards the chip and pin technology in the United Kingdom was driven by increasing card fraud, which totaled to a lot of money in 2000. After the introduction of chip and pin technology, the re has been a drastic reduction in card fraud in the UK. The technology is a technology backed by the government to implement the benchmark created by EMV to curb card fraud (King, 2012). This was meant to reduce the fraud committed when transactions are completed face to face with the customer. All major card providers in Europe and Canada have gone the way of the chip and pin technology, but the United States still uses magnetic strips on their debit and credit cards. From research, the working of the chip and pin technology is stated as replacing the common form of card performance; magnetic strips and requiring the customer to sign the accompanying receipt (Diebold, 2011). In chip and pin technology, the customer’s information is stored on an IC chip embedded in the card as opposed to the magnetic strip used before the technology was introduced. The data is then encrypted on the card using different algorithms that generate random numbers when transactions are recorded. I n the previous magnetic strip technology, the card was swiped on a terminal, but with the new technology, the customer inserts the card in a terminal, the information in the integrated circuit is decrypted and authorization for the transaction provided. When the authorization for the transaction is provided, the customer then enters a unique pin, a receipt is generated and the money deducted from the cardholder's account. One of the main security features of chip and pin technology is the ability to use wireless terminals that are more secure since the card is used in the presence of the customer. This also means that the terminals use secure modes of transmission of customer data to a central database. Before the introduction of chip and pin technology, magnetic strips were used for authentication reasons (Financial Fraud Action UK, 2011). The magnetic strip on the card had personal details for the holder which could be related to the bank account in case they want to perform any t ransaction like withdrawing money on the ATM or purchasing items in shops using the card.