THE BLOG
11/12/2015 08:53 am ET Updated Nov 12, 2016

Ending Indifference Toward Consumer Financial Safeguards

We are all too familiar with the financial crisis of 2008, as many hardworking Americans lost their homes, jobs, and much of their savings. That crisis was exacerbated by Wall Street's insistence on cutting corners in search of profits, and it appears that behavior has not changed, only this time the victim is your personal information.

Recently, headlines are teeming with news of data breaches and the resulting fraud and identity theft that often occurs. Following breaches at major companies, government agencies and the like, we now know that our businesses need to address data security, including the security of our payment mechanisms. Wall Street can and should be doing more to prevent the harmful effects of consumer data security breaches, but instead, it has maintained its unwillingness to adopt more secure payment mechanisms like chip-and-PIN credit cards.

Consumer vulnerabilities affect everyone -- financial institutions and retailers who must bear the cost, small businesses whose reputations' suffer if their consumers are affected by fraud, and most importantly, working class Americans who have to bear these consequences firsthand.

Chip-and-PIN cards are unique in that they fortify the payment security process in two different ways. An embedded computer chip creates a unique transaction code that cannot be duplicated and then a four-digit PIN is required at each transaction. The internal computer chip is nearly impossible to replicate and without knowledge of the PIN, a thief will have no use for the card.

European countries, Australia, as well as parts of Asia and Africa have remedied many of their payment security flaws with chip-and-PIN technology. Upon implementation in the last decade, credit card fraud during point-of-sale transactions declined significantly in those countries. In the United Kingdom, card skimming and counterfeiting dropped by over 70 percent. France saw an 80 percent decrease.

Despite the empirical evidence demonstrating the success of chip-and-PIN, U.S. credit card companies and other financial institutions decided to issue chip-equipped cards with still-vulnerable signature requirements here, a half-measure that still leaves Americans susceptible to fraud. Major credit card companies even used their clout to bend everyone -- small and large businesses alike -- to their will by establishing an October 2015 deadline to adopt the less secure chip-and-signature cards that are becoming widespread. Most recently, even the Federal Bureau of Investigation (FBI) was pressured to take down a public service announcement touting the security benefits of chip-and-PIN cards by banking industry lobbyists.

The extent to which the financial industry still wields influence is jarring. Despite the litany of their past mistakes and wrongdoings, they are still putting themselves first at the average American's expense. The combination of using chip and PIN technologies could more effectively protect American's from credit card fraud, but the big banks and credit card companies -- some of which received taxpayer provided bailouts -- appear unwilling to invest in and adopt these common sense measures.

Federal lawmakers and regulators must examine this issue to see if the banking industry is doing everything they can to safeguard Americans. We all deserve the reasonable expectation that our financial and personal information will be protected through the best technology available at all times.