NRF: Chip-and-signature cards aren't cutting it

While the financial industry is supporting the use of chip-and-signature cards to meet the upcoming Oct. 1 EMV mandate, consumers are less convinced.

According to a new survey released by the National Retail Federation (NRF), 62% of U.S. consumers believe new credit cards being issued by banks don’t go far enough to protect card data or prevent fraud.

“Consumers are worried that chip-and-signature cards really amount to chip-and-chance,” said NRF senior VP for government relations Mallory Duncan. “The chip cards are a step forward, but shoppers are concerned that they don’t go nearly far enough. Unless the new cards require the use of a PIN, they will only provide half the safeguards needed to stop increasingly sophisticated criminals.

Among the 2.035 U.S. adults surveyed, 62% said they prefer chip-and-PIN cards to cards that just use chip and signature, and 63% said chip-and-PIN cards provide more data security than those that don’t. Among millennials, the preference for PIN was even stronger, at 71% of those between the ages of 18 and 24 and 66% for those ages 25-34.

Contrary to some banks’ claim that consumers don’t want to have to remember a PIN, the survey found 83% of consumers who say a PIN is more secure would consider it worthwhile even if they had to remember a different number for each card.

The survey also found 71% of consumers with a credit card have at least one chip card in their wallets, but that only 43% of credit cards are chip cards since most consumers have more than one card. Only 47% of consumers with a chip card have used it in a chip reader.

Starting Oct. 1, banks will no longer be liable for payment card fraud costs if the card used is a chip card and the retailer does not have a chip card reader. Many retailers believe the liability shift is unfair because the chip reduces banks’ exposure to fraud, while the lack of a PIN leaves retailers exposed to fraud.

The new cards, which banks have been rolling out over the past year, use EMV technology – short for Europay MasterCard Visa – to store data on an encrypted computer microchip. But unlike most EMV cards used around the world, which include a PIN, most cards being issued in the U.S. use a signature to approve the transaction.

The NRF also believes that chip-and-signature cards do not prevent the misuse of lost or stolen cards, since thieves can forge a signature. In addition, a secret PIN protects against fraud even in cases where a criminal is able to circumvent the chip.