Question

We have explored the cyber attack on the Target Point of Sale (POS) systems that resulted in 40 million customers having their credit card information stolen. There have been some changes in the way we use a credit card in stores now -- using the chip reader instead of the swipe reader.

• Does the chip reader make the transaction safer?
• What can companies do to prevent a cyber attack like what Target experienced?
• What can consumers do to protect themselves at the point of sale?

Answer 1

1. Does the chip reader make the transaction safer?

Yes, It definitely makes the transaction safer than using a magnetic strip but it is not 100% secure. There are lots reason behind this chip (EMV) cards why it makes the transaction safer than a magnetic strip card.

• Chip cards are hard to clone:  These computer chips can store and process much more data than the magnetic stripes on cards, which makes them much harder to counterfeit. EMV prevents cloning, and because the verification process is dynamic (it generates a unique code each time the card is used, whereas magnetic stripe transactions use a static code), it also helps prevent theft of the card using a skimmer. A skimmer is just a piece of hardware installed over a magnetic stripe terminal that copies the card data when a card is swiped.
• EVM cards have encryption mechanism: Magnetic-stripe cards broadcast bank information into the payment terminal as it is whereas the chip (EVM) keep it safe by encrypting it. It has built in encryption mechanism right into it. When you dip a chip card (it’s a dip instead of a swipe), it talks back and forth with the payment terminal in a secret language to make sure it’s actually you who’s paying.
• EMV is designed to prevent fraud: EMV cards are primarily designed to prevent fraudulent transactions that take place when someone physically swipes a counterfeit card at a payment terminal.

There are lots of advantages of chip based card over magnetic strip cards but it sill has some disadvantages:

• It do not solve the problem of e-commerce fraud. It's still relatively easy for a thief to use stolen
  credit card information online, and this type of fraud actually jumped by 40% between 2015 and 2016.
• This chip based cards take more time to complete transactions due to complex security mechanism.

2. What can companies do to prevent a cyber attack like what Target experienced?

Companies need to pay attention to a lots of standard practices to prevent such frauds. Some of these measures could be :

• Secure your Wi-Fi networks: Companies should keep their internet network secure and keep upgraded their systems to avoid the trending vulnerability or threats.
• Employ EVM based machine at POS: Even though EVM cars are widely used now there are still some merchants who have not upgraded their machines and still using the old magnetic swipe machine.

3. What can consumers do to protect themselves at the point of sale?

A lot of responsibility is on consumer head also using the card. They also need to follow some standard practices to keep themselves from this king of frauds.

• Change PIN regularly: A card PIN must be changed at a regular interval moreover same PIN shouldn't be used for multiple cards.
• Use Mobile pay:  Many risks could be avoided by adding debit and credit cards details to phone. Mobile payments don’t actually store the credit card number of the device. Instead they use something called “tokenization” to send temporary numbers the point of sale can use for that specific transaction. Then the number changes, and can’t be used again. Plus with newer smart phones, Apple and Android pay use biometrics (fingerprints) to make it even more secure.