Not sure how we got on the topic of replacement cards, but ok.

I’m not sure what else a bank could do other than cancel the card. You said the customer may have been compromised, but as far as the issuing bank knows, it’s only the CARD that’s compromised. Short of investigating every aspect of the customer’s life, they couldn’t determine that and the best they can do is change the lock on the door: the card. Inefficient and expensive, to be certain, but I don’t think it’s a dirty little secret. More to the point, if a customer’s card were defrauded and the bank DIDN’T replace the card, the customer would be justifiably angry.

Maybe this all changes under PIN (regardless of whether the stripe lives on), I don’t know. But I don’t think the current process is quite as nefarious as you suggest!

Further, the customer inconvenience for those traveling to Botswana and the US pales in the customer experience associated with the above dirty little secret.

@Mark – its not fear of chip/pin that I describe. It is fear that is doesn’t do what it promises so long as we compromise the card with the mag-stripe.

@Dave – eloquently stated.

Whether that’s true or not I don’t profess to know, but this gentleman stated it as a common fact shared in the industry. I certainly don’t doubt it. If it’s true, or even if it’s accepted dogma, I can understand why the issuers are reluctant to mess with the customer’s experience or risk turning customers away at the counter.

Another note: Canadian merchants are still allowed to use the clunky old imprint devices. I’ve taken three cabs in the last month that used the old ‘kachunk-kachunk-sign’ method of security. Suddenly magstripe doesn’t seem so bad…

I agree. This seems to me to be one of the main lessons learned from the U.K deployment. If people need a magnetic stripe card because they are going to Botswana or the U.S., it’s trivial to provide instant issuance of short-validity stripe cards with different PANs at a branch (or from a vending machine, frankly).

However it is now the norm and in time it will be in Canada. Cloning will always happen, charge backs will always happen but overall I do feel more secure with my chip and pin.

It’s funny though as I still use my chip’ mastercard and visa from the UK for purchases here I always get the same replies ooh what’s this then is it real? *rolls eyes* from a selfish point of view I can’t wait til the cards are rolled out here as less people will stop assuming my card is some fake or “wont work” without even trying as it can be run on the old or new system.

I tried to buy something at a major office supply store in downtown Toronto was just over $500 using my MasterCard.
The clerk politely stated “Oh we don’t take MasterCard over $300. Do you have a Visa or AMEX card?”

I was shocked, talked to the store manager and found out it was due to high MasterCard fraud. He gave me a head office number and the VP of security (or whatever the title was). A couple days later this person called me back and we had a nice hour long candid conversation on the issue once he knew I worked for a bank.

Basically he said their POS readers were not upgraded to read all ‘tracks’ on the MasterCard as it is cost prohibitive. He said that the banks are constantly pushing new technology on the merchants that come at their expense (software, hardware upgrades). In his opinion, it is the banks who gain the most with these advancements as it absolves them of liability yet they (the banks) bear none of the merchant costs in supporting these newer technologies.

In any case, apparently MasterCard has way higher fraud than Visa with this particular company. And at this specific location (University and Dundas), as well as a few others in the city, they imposed a ‘not over $300’ policy for MasterCards as it was the cheaper solution (although not a permanent one I’m sure).

Without mandatory adoption for MasterCard Chip terminal conversion, MasterCard issuing banks are setting themselves up to be targets of fraud from the Visa fallout. In turn, merchants who are exposed to bank chargebacks /losses may simply stop accepting MasterCard.

Relating directly to Chip, my recent weekend shopping excursion with my shiny new Chip debit card resulted in ONE merchant (out of about 20) that used the Chip method of purchase (upon swiping the card the terminal instructed them to insert it in the chip card reader). The rest of the store clerks only had comments such as “what does this do?” or “that is the first time I have seen one of these”. None of their terminals accepted the Chip insertion method even though I tried by inserting it in the chip reader slot on their POS terminals.

We have a ways to go yet.

My assumption — and Colin’s, I would guess — is that customers will still be able to use their card, whether presenting chip or magstripe, in cross-border situations just as they do today. I’ve not heard that the issuers will limit customers who, in Colin’s scenario, take their chip card to the US and use it at a swipe terminal to pay for goods. I agree with you that if issuers did impose such limits they could mitigate losses in a magstripe-only environnment…I’d just be surprised if this was the approach right away because of the customer dissatisfaction it would cause.

The second is cards from the States. Because the US is our largest trading partner and a major source of tourists, we want to be able to support their payment methods (otherwise we cut ourselves off from money flowing out the States). Its difficult to force Canadians to pay extra money for the use of magstripe cards when the POS system continues to be able to support them and Americans can use the technology here in Canada for free.