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Credit card fraud in the U.S. is a major problem for issuers, payment processors and merchants alike, and a technology that is more or less ubiquitous in other counties could help to significantly reduce those issues in the future.

“Chip and PIN,” technology is the standard in many major foreign countries across Europe and Asia, and even in Canada, according to a report from McClatchy Newspapers. This kind of card – which is also known as EMV, named for Europay, MasterCard and Visa, the companies that created it – has been proven to be far more effective at reducing instances of fraud than the magnetic strip cards that have been issued in the U.S. since the technology was invented decades ago.

In fact, EMV is so effective at fighting bogus transactions that while the U.S. accounts for only 27 percent of all payment card transactions globally, it also suffers 47 percent of losses to fraud, the report said. As recently as 2010, credit card fraud in the U.S. cost businesses $3.56 billion.

Chip and PIN is better at protecting payment data because, as the name implies, it uses an encrypted microchip to store information on the associated account, and can only be accessed after a code is entered by the cardholder, the report said.

“There’s no question that chip and PIN is a much safer technology than signature-based cards, which are a lot easier to replicate,” Diane Brisebois, president and CEO of the trade group the Retail Council of Canada, told the news agency.

Further, it has been the standard in foreign countries for some time, the report said. Canadian merchants have been required to accept these payments for the last two years, and Europe has operated under the standard for more than a decade. And while most businesses in Canada still accept traditional credit card transactions, it is growing increasingly difficult to find one that does so in Europe. And often, travelers from those countries who come to the U.S. will have even greater problems finding a merchant who can accept their newer cards.

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That may soon change, though. More issuers in the U.S. are now giving some borrowers cards capable of completing both kinds of transactions, and Visa is now mandating that merchants are able to accept EMV purchases within the next few years.

Image: dno1967b, via Flickr

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