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Banking With Obsolete Debit/Credit Card Technology

I have reported a lot in this blog about skimming: where identity thieves plant devices inside gas pumps at gas stations and attached to bank ATM machines to steal consumers' credit- and debit card account information. The thieves then make cloned cards with the stolen data and drain consumers' bank accounts.

I was disappointed to read in the June 2011 issue of Consumer Reports that banks in the United States use an old, obsolete technology for our credit- and debit cards:

"American credit- and debit card data are usually stored unencrypted on a magnetic stripe on the back of each card, which thieves can easily and cheaply copy. The U.S. and some non-industrialized countries in Africa are among the only nations still relying on magstripe payment cards, which came into wide use in the 1970's."

So, we consumers bank in 2011 with 1970's technology. You may perform mobile banking with your state-of-the-art 2011 smart phone or tablet computer, but that card in your wallet or purse is still 1970's technology. If you travel outside the United States, perhaps you may have already noticed the problem:

"China has announced that it will no longer produce or accept [magstripe] cards after 2015... The European Central Bank has recommended that banks stop issuing magstripe cards after 2012."

So, the rest of the planet is moving towards newer debit/credit-card technology that offers far more security. The newer cards are called EMV "smart cards" with embedded computer chips that store and transmitt encrypted data with a unique identifier for each transaction. Encrypted data makes it more difficult for identity criminals.

According to Bank Info Security, ATM skimming losses far exceed gas station pump loses. ATM skimming losses average $350,000 per day in the United States. In Europe, 95% of the bank ATM machines are EMV compliant and bank ATM losses dropped 14% in 2010 in 22 countries: Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, and the United Kingdom.

Experts have seen ATM losses increase in Europe where identity criminals have created bogus EMV debit/credit cards with consumer bank account data stolen from magnetic-strip cards. So the thieves are smart and persistant... enough to use 1970's technology to hack 2011 technology.

Why aren't banks in the United States moving with the rest of the planet to newer card technology? that would seem to be the logical step, as it would help everyone worldwide: banks and consumers alike. According to Consumer Reports:

"The [identity theft and fraud] losses for banks do not yet exceed the costs of a switch-over, although merchants say that's because they usually shoulder much of the cost burden from fraud."

I don't use a telephone built in the 1970's. I don't drive a car built in the 1970's. And, I wouldn't want to either, and I'll bet that you feel the same way. Consumers should not have to bank with debit- and credit-card technology from the 1970's when newer, more advanced, and more secure technology exists.

If this bothers you (and I surely hope that it does), write to your elected officials in the U.S. Congress and demand action. And, ask your bank why its uses old technology. I am curious what answers you'll hear.


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How a debit card works is basically the same in most respects. You purchase, set your number or swipe your card and your purchase goes through. Marchand, again, will be paid by the company that issued your credit card. This is where the difference is. With a debit card money already be in your account. In other words, you have already paid a certain sum of money to be visible in your credit card.


While it may be nice to know generally how your debit card works, your comment does not address the obsolete technology issue between the US and Europe. I and readers would like to hear more on-topic comments, please. Otherwise, I will classify your comments as advertising spam and delete them.

Thanks in advance,


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