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US slow to adopt tech that prevents credit card fraud

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Experts say the reason fraud is down outside the U.S. is most cards throughout Western Europe have an encrypted chip implanted in them. Experts say the reason fraud is down outside the U.S. is most cards throughout Western Europe have an encrypted chip implanted in them.
RALEIGH, N.C. -

Last year's data breach at Target left between 70 and 110 million customers vulnerable to identify theft. And after similar breaches at Michaels and Neiman Marcus occurred, experts now say that kind of fraud is rising.

Credit and debit card fraud is up 70 and 80 percent in the United States between 2004 and 2010. But for the same period in the United Kingdom, counterfeit credit card fraud was down 63 percent.

Experts say the reason fraud is down outside the U.S. is most cards throughout Western Europe have an encrypted chip implanted in them.

"Instead of swiping a magnetic stripe, they're actually going to be using the chip itself. So the reader will look very similar, but the information is being pulled in a different way," explained Nathan Batts with the North Carolina Bankers Association.

Known as EMV cards, or chip and pin, some experts believe the technology could have prevented Brandon Fairchild and Christina King from becoming victims of the Target data breech, when a $12 purchase turned into $900 stolen from their account.

"It was an entire paycheck and it hadn't been spent yet, so all of our plans of going grocery shopping and everything -- we were left in a bad way for several days before I could even get money from family," Fairchild explained.

The bank eventually put the money back into their account, but their case is becoming more common and the need for integrated circuit cards is becoming more apparent.

While the U.S. is the last developed country to adopt the technology, the change is coming in 2015. However it will take years to fully implement and could cost banks and retailers up to $11 billion, according to some estimates.

"[You're talking] about the billions of dollars in costs that are associated with it. That's pretty significant and that's something that has to be factored in too," Batts said. "So it's taken a bit of time to do that sort of implementation, but we're making good progress."

As of Oct. 1, 2015, Visa and MasterCard said they will start telling banks and retailers that if fraud occurs, the party with the lesser technology will have to pay for any money lost. The move is a way to encourage banks to issue EMV cards and for retails to update their card readers.

Retailers say the switch to EMV cards is long overdue and the magnetic strip on the back of U.S. cards is an antiquated technology. In fact, Target announced that it would switch its in-store credit card to chip and pin early next year.

"Using the chip with the smart card technology that's tied to the PIN could have stopped a lot of that activity that happened after [the Target] breach," said Andy Lee, president of the N.C. Retail Merchants Association. "It probably would have shut a tremendous amount of it down."

Ellen said the new cards could even save consumers money because the cost of such a massive data breech is often times passed on to customers.

Until the switch is made, though, Doug King with Atlanta's Federal Reserve Bank said the U.S. will continue to be a target for criminal looking to counterfeit cards.

"One would like to think, with that kind of investment, that we would actually see a reduction in fraud," King said. "I think it's safe to assume that as the U.S. is again the last holdout in this EMV race, that if criminals want to counterfeit cards [then] the U.S. is a prime target for that."

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Derick Waller

Derick is a reporter for WNCN covering crime, education, politics and just about everything in between. He has a knack for adapting to any story and consistently delivers information quickly across multiple platforms. More>>

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