Despite the prevalence of identity and credit card theft in the credit industry, plans for the adoption of a new and safer system have hit a snag, according to industry experts. Questions are now being raised regarding the $8 billion price tag for an overhaul of the credit industry's security system. While most card companies admit that there is a need for a better system to be set in place, experts believe that card firms are actually downplaying the actual losses they are incurring from credit thieves.
Analysts point out that major card companies often keep mum regarding losses attributed to security breaches and identity theft. However, independent financial firms estimate that industry losses run in the billions of dollars. On top of that, analysts are expecting companies to lose billions of dollars more each year if the outdated magnetic strip on more than a billion credit cards in the U.S. is not replaced soon.
In Europe and other regions, card issuers have resorted to use a combination of microchips and Personal Identification Number (PIN) systems to safeguard important information on credit cards. These so called "smart-cards", experts say are far more secure than a large majority of credit and debit cards currently being used by millions of Americans.
Security experts point out that while the smart-card system is not foolproof, it offers a higher degree of security. For one, thieves must have the actual card in order to extract valuable data from it. The current cards in circulation in the U.S. do not offer this kind of safeguard. Using simple swiping machines, card and identity thieves can steal relevant information from credit and debit cards by scanning the magnetic strips. Scam artists can then create dummy cards and use them to purchase items, which will be charged to their victims.
However, switching to this safer and more secure system would entail a substantial amount of money. Swiping machines across the nation would have to be replaced by newer devices designed specifically for smart-cards. Experts say that overhauling the security system of the credit industry in the United Kingdom cost some $1.6 billion. With the U.S. having five times as many credit and debit cards in the U.K., the final bill can top $8 billion. For the meantime, retailers and card companies are at odds over who will have to foot the bill. Merchants argue that the credit industry must pay for the sweeping changes while card issuers say that retailers must shell out the needed money.