Chip Credit Cards Being Targeted by new 'Shimming' Fraud Scheme

By Prei Dy, | May 31, 2017

A new fraud scheme is targeting chip credit cards.  (YouTube)

A new fraud scheme is targeting chip credit cards. (YouTube)

A new scheme called "shimming" is now preying on chip credit cards, which were rolled out a few years ago to reduce fraud.

Perpetrators who target chip credit card secretly insert a paper-thin device inside a chip card reader on a credit card terminal. Then, when the credit card is placed on that slot, the device (called "shim") captures the card information by reading the chip.

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Chip credit cards are protected by a technology that prevents thefts from making a counterfeit chip card. However, its less secure magnetic stripes allow crooks to create a counterfeit card with a stripe only. The card could then be used for fraudulent transactions at businesses that have not upgraded its technology and still accept non-chip cards.

Although such scam is not widespread yet, it is something to alarm authorities and to serve as a reminder for credit card holders to monitor fraudulent purchases on their credit card statements.

Meanwhile, MasterCard is planning to introduce a variation of credit cards that uses fingerprint identification to produce secure point-of-sale transactions. The card holder's fingerprint, which will be stored on the card's EMV chip using a fingerprint reader embedded on the card, will be needed before a transaction could go through.

The chip validates the user's identity by matching the fingerprint to the stored pattern. The change process is simple for merchants, as those with a chip reader do not need to invest on a separate fingerprint reader.

Theoretically speaking, this biometric card improves security compared with chip-and-PIN, and fingerprint card is more secure than a chip card that needs only a signature.

The tech is currently in a trial phase in South Africa but MasterCard plans to expand testing within a few months across Asia and Europe. The company is also targeting a worldwide rollout by the end of this year.

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