NRF Urges Adoption of PIN-Based Credit Cards

Overhaul of "fraud-prone" cards currently used in U.S. "long overdue," said Duncan

National Retail Federation NRF

WASHINGTON -- The National Retail Federation (NRF) said on Wednesday that it is time for an overhaul of the nation's fraud-prone credit- and debit-card system. Banks' insistence on cards that use a signature instead of a personal identification number (PIN) puts merchants and their customers at risk, NRF senior vice president and general counsel Mallory Duncan wrote in a prepared statement submitted to the Senate Committee on Commerce, Science & Transportation.

The committee held a hearing, Protecting Personal Consumer Information from Cyber Attacks & Data Breaches, on Wednesday on criminal cyber-attacks in which consumer card numbers have been stolen.

Card companies have continued to promulgate the use of fraud-prone signature cards despite their own research, conducted almost 25 years ago, that showed that PIN-based cards provided more security for consumers, retailers and banks, said NRF.

"Everything a fraudster needs is right there on the card," NRF senior vice president and general counsel Mallory Duncan said, referring to how the cardholder's name and account number are clearly printed on each card along with the expiration date and security code. "The bottom line is that cards are poorly designed and fraud-prone products that the system has allowed to continue to proliferate," he said.

Duncan said current magnetic stripe cards with signatures are too easy to duplicate and forge.

"There are technologies available that could reduce fraud," he said. "An overhaul of the fraud-prone cards that are currently used in the U.S. market is long overdue."

NRF has long-advocated for replacing current cards where consumers sign to approve a transaction with next-generation cards that would require use of a PIN. With or without an embedded microchip, a PIN-based card would provide greater security for consumers and retailers alike, Duncan said.

"Protecting all cards with a PIN instead of a signature is the single most important fraud protection step that could be taken quickly," Duncan said. "It's proven, it's effective and it's relatively easily implementable. PIN debit cards are close to ubiquitous worldwide, and readily producible in the U.S. Chip is a desirable add-on. If speed of implementation is of importance, then substituting PIN for signature is preferable to implementing chip."

Along with switching to more-secure, PIN-based cards, NRF supports additional steps aimed at preventing fraud and data breaches, including end-to-end encryption of data, tokenization rather than storing data and mobile payments.

NRF is the world's largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries.