Cards: PINs vs. Signatures Sparks Industry Debate
As the payment industry begins to move toward replacing magnetic stripe cards with cards that use embedded smart chips, credit unions and other card issuers will have to eventually decide whether they will issue cards that use personal identification numbers or signatures to validate transactions.
This is a debate unique to U.S. financial institutions. Other nations that have moved to the chip cards have payment industries that have adopted PIN platform validation.
But Randy Vanderhoof, executive director of the Smart Card Alliance, an industry group of chip card developers, manufacturers and issuers, argued that the signature vs. pin debate is being misunderstood. While it’s true that an American traveler with an embedded-chip payment card may very well find themselves unable to purchase a ticket from a railway kiosk in London, that will be because the railway has set its kiosks up to accept only cards with PINs, not because there is anything inherent in the technology that said a kiosk can only accept cards with PINs.
In the U.S., a similar railway with kiosks could set them up to ask first for a PIN, but if the card does not support PIN the kiosk could then default to using the validation information contained in the chip alone and not require the cardholder to do anything else, Vanderhoof explained. Each nation has different payment regions that can make these sorts of decisions, he said. In the U.S., where they might be more signature-only cards, merchants could set up their kiosks and other unattended payment venues to take both signature and PIN validation.