What is Chip and PIN?
Have you ever wondered on how a thin card can do all the transactions in a simple swipe? Let me introduce you to Chip and PIN. Chip and PIN was invented from United Kingdom by their government to implement the standards of secure payments.
Before, credit card transactions use a mechanical imprint or magnetic stripe to read and record account data and a signature for verification purposes. The customer hands their card to the merchant or clerk, who either makes an imprint from the raised text form of the card or swipes it thru a magnetic reader. Then the clerk verifies the signature if it matches from the back of the card and from the signature in the print slip for transaction verification. This kind of system was effective but there are flaws such as chances to steal the card and forge the signature from the card.
HOW IT WORKS
To solve the security flaw before, retailers and banks replaced the traditional magnetic equipment with a new technology called the smartcard, wherein the debit and credit cards contain a microchip that is embedded and are automatically authenticated using a PIN or personal identification number. The card is attached into a “PIN pad” or a swipe card reader that is modified and accesses the chip inside the card. After verifying that the card is authentic, the buyer enters a 4 digit PIN which is read by the chip of the smartcard. If the codes match, the chip tells the terminal that the PIN is correct, and if not, the chip tells that PIN is incorrect.
THE BENEFITS
• Before, the card has to be handed to the clerk or assistant to pay a transaction and verifies via phone call; Chip and PIN is faster because the card issuer is electronically contacted through the information in the card which makes it faster to authorize and verify the transaction.
• Cloning of the chip is not possible which makes it a big help for minimizing fraud and crime reduction.