Chip and PIN - Benefits

Benefits

Under the old system, a customer had to hand their card to the assistant to pay for a transaction. When credit cards were first introduced, offline portable card imprinters (mechanical rather than magnetic) which did not connect to the card issuer were used without the card leaving the customer's sight; transactions over a certain limit had to be verified by telephoning the card issuer. Later equipment was introduced which electronically contacted the card issuer using information from the magnetic stripe to verify the card and authorise the transaction; this was much faster, but had to be in a fixed location. Consequently, if the transaction did not take place near a terminal (in a restaurant, for example) the card had to be taken away from the customer to the card machine. It was easily possible at any time for a dishonest employee to swipe the card surreptitiously through a cheap machine which would take a couple of seconds to record the information on the card and stripe; in fact, even at the terminal, the criminal could bend down in front of the customer and swipe the card on a hidden reader. This made illegal cloning of cards easy, and a common occurrence.

Since the introduction of Chip and PIN, cloning of the chip is not feasible; only the magnetic stripe can be copied, and a copied card cannot be used on a PIN terminal. Fortuitously, the introduction of chip and PIN coincided with wireless data communications technology becoming inexpensive and widespread, and wireless PIN pads were introduced that could be brought to the customer and used without the card ever being out of sight (this would have been possible, had the technology been available, with magnetic stripe cards). Chip and PIN and wireless together reduce the risk of cloning of cards by brief swiping.