MasterCard, Visa, American Express and Discover are urging adoption of credit cards that use computer chips instead of magnetic strips.

(Photo: Courtesy of Republica)

Recent large-scale breaches of customers' credit card information from retailers like Target and Neiman Marcus have consumers and businesses calling for a more secure card payment system. And Littleton, Colo., based CPI Cards is well-positioned to take advantage of the momentum towards more secure credit cards, since it is a leading U.S. maker of payment cards that use a chip instead of the standard magnetic strip to store customer data.

More than 100 million people had their card information stolen last year. It's easy for thieves to use stolen credit-card data because the U.S. relies so heavily on magnetic strips, according to Steve Montross, CEO of CPI Cards, in Littleton, Colo. 

The chorus of voices urging migration to chip-based credit cards points to their use in much of Europe and Asia, which has helped prevent credit card fraud in those areas.

"As the rest of the world, or the other major economies, have moved to chip-based card payment systems, what has happened is the fraudsters have started focusing more and more on the U.S.," Montross says. "It's the weak link, so to speak."

While chip cards wouldn't stop thieves from taking card information, it would make that card data far less valuable, because thieves wouldn't be able to make counterfeit copies of the cards and use them to buy goods and services.
MasterCard, Visa, Discover and American Express have set a deadline of October 2015 for retailers, banks and other businesses in the payment chain to convert to chip-based cards. After that date, the card networks say, those other businesses would be responsible for fraud that occurs with magnetic strip cards.
But while chip-based cards will help cut down on credit card fraud stemming from in-store transactions, it won't do much to stop online fraud, Montross says. In fact, when England made the switch to chip-based cards about a decade ago, fraud perpetrated online increased significantly. Since stealing credit card information in stores was made more difficult, thieves turned to the Internet.
Montross says one way banks are addressing that problem is by issuing tokens along with the credit cards. The tokens have changing sequences of numbers that customers enter along with their card information to make online purchases.