Chipping away at secure credit cards

Credit card companies have rejected Australian law enforcement agencies' claims this week of escalating complaints over fraudulent use of chip-enabled smartcards. Companies like Visa and American Express claim the chip technology used in those cards is 100 per cent secure.

Sources from one federal law enforcement agency said the agency was "tired of dealing with the same offenders" from organised crime groups attempting to use smartcards fraudulently.

Furthermore, the source claimed "poor technology" was "contributing to the problem".

According to the source, there has been a rise in organised criminal rings using chip-enabled smartcards (running on the EMV-standard (Europay-Mastercard-Visa)) to perform fraudulent credit and debit transactions.

Typically such offenders cracked the security of smartcards by using methods like covering the chip with gaffer tape or foil, or peeling the chip off the card; they could then use the card successfully if its magnetic strip was intact, the source said.

All transactions revert to the magnetic strip making the well-promoted 'secure' chip useless.

According to Visa International, the regional credit card market -- covering smartcards (stored value cards) and credit and debit cards -- is worth between $200 and $300 billion. The fraud rate on plastic cards is estimated at around 0.07 per cent of the market's value.

American Express' regional director for corporate security, Bruce Scott, said he was "not aware of a single case reported within [Amex] where a chip-based smartcard was tampered with in any way."

Scott said the American Express smartcard offering, called Blue, is "100 per cent secure". Amex's smartcard is a clear plastic card with a hologram, a chip and a magnetic stripe so it can be used regardless of whether the point-of-sale terminal has a chip reader.

According to Scott, in the last 12 months Amex has also upgraded the chip technology used in Blue from a Proton chip to a Multos chip, which he said enhanced the card with "more security features".

He pointed out that he worked with the police daily on issues like card fraud and could not cite one reported incident in which Amex smartcards were "broken" for fraudulent use.

He said he had not heard from competitors like Visa or Mastercard that any such activities were on the rise.

However, he conceded: "They're not obligated to report that sort of thing to us either."

Commenting on the alleged rise in smartcard fraud in Australia, Visa International's head of chip cards for Australia and New Zealand, Vipin Kalra, said: "We haven't seen of any instances of such crimes with smartcards."

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