The U.S. adoption of computer-chip payment cards: implications for payment fraud

Richard Sullivan

Economic Review, 2013, issue Q I, 59-87

Abstract: The fraudsters, phishers, hackers, and pickpockets who thrive off payment card fraud may soon have their work cut out for them. U.S. financial institutions have announced plans to add computer chips to their debit and credit cards in the next few years, a move likely to make payment card fraud more difficult. ; However, the fraud will not disappear. As other countries around the world have adopted computer-chip cards, they have seen fraud patterns migrating to channels with relatively weak security. ; Sullivan describes how computer-chip cards and magnetic-stripe cards work?and how they differ. He draws conclusions from the recent transitions to computer-chip cards in France, the Netherlands, and the United Kingdom, and recommends that the United States establish a fraud-monitoring system to help track payment card fraud and measure the losses sustained by its victims.

Date: 2013
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