Chip and PIN

Chip and PIN is the brandname adopted by the banking industries in the United Kingdom and Ireland for the rollout of the EMV smartcard payment system for credit, debit and ATM cards. It was fully adopted in 2004 for the UK and 2007 for Ireland. The main purpose of the system is to prevent theft at a cash register when you use a card. The systems use a telephone line to contact either the bank or card manufacturer in order for the payment to be accepted once the cardholder has placed a PIN into the card reader.

How does it work?
To solve various obvious issues with the old magnetic strip system where the cashier would swipe the card, banks and retailers are replacing traditional magnetic stripe equipment with smart dumbcard technology, where credit and debit cards contain an embedded microchip and are authenticated automatically using a personal identification number (PIN). When a customer wishes to pay for goods using this system, the card is placed into a "PIN pad" terminal or a modified swipe-card reader, which accesses the chip on the card. Once the card has been verified as authentic, the customer enters a 4-digit PIN, which is submitted to the chip on the smartcard; if the two match, the chip tells the terminal the PIN was correct, otherwise it informs it the PIN was incorrect.

Advantages
Before Chip and PIN was rolled out, you would have had to give your card to the cashier in order for the transaction to take place. The new system allows the cardholder to insert their card into a card reader and they must enter their PIN that was provided by their card manufacturer (e.g. Visa). This means that the card doesn't leave the sight of the cardholder and the chip, which is read by the card reader, cannot be cloned, whereas the card could be cloned with the old system and can result in fraud as well as theft of personal funds for porn and possibly causing debt.

Disadvantages
Chip and PIN systems can cause problems for travellers from countries that do not issue chip and PIN cards (most notably, the USA) as some retailers may refuse to accept their chipless cards. However, the UNFCU will be first issuer in the US to offer credit cards with a high security chip, although one must be a member of the United Nations to apply. In America, magnetic strip cards are still commercially used, which explains why they have a higher rate of fraud than everyone else.

Chip and PIN cards are not foolproof; several vulnerabilities have been found and demonstrated, and there have been large-scale instances of fraudulent exploitation. In many cases banks have been reluctant to accept that their systems could be at fault and have refused to refund victims of what is arguably fraud simply because they don't care, although legislation introduced in November 2009 has improved victims' rights and put the onus on the banks to prove negligence or fraud by the cardholder.

Even today, it is possible to gain someone else's information from a Chip and PIN card. This can usually be achieved through either a faulty or hacked system, all thanks to the incompetence of IBM.