By Jerry Rogers
I don’t shop on Black Friday, and I am home all day with my family on Thanksgiving; however, I understand too that a modern economy never really sleeps. Why should it? How can it? Frank Sinatra sang about how capitalism’s most important city – New York, New York – is a city that never sleeps.
“I want to wake up, in a city that doesn’t sleep and find I’m king of the hill Top of the heap.”
You don’t make it to the “top of the heap” by keeping your doors closed or by ignoring changing times and technologies. Entrepreneurship, innovation, disruption, and transformation are pillars of free enterprise. Sometimes this requires getting up earlier, staying open longer, welcoming modernity, and embracing new technology.
As Charles Murray has eloquently made clear, “everywhere that capitalism subsequently took hold, national wealth began to increase and poverty began to fall. Everywhere that capitalism didn’t take hold, people remained impoverished. Everywhere that capitalism has been rejected since then, poverty has increased.” Free enterprise is the only system in the history of humankind to lift people – billions of people – out of poverty.
So, for those of you celebrating capitalism this Thanksgiving or Black Friday, take a look at your credit and debit cards. I write this because just this week my bank sent me a new business card with chip technology. My bank is embracing new technology (and modernity) to help protect me from having my accounts hacked.
An astounding 48 percent of the world’s credit card fraud happens in the United States. In recent years, our credit card security has fallen behind most nations, making us the target of choice for fraudsters. Being the weakling in the room is not the proper place for American Entrepreneurship. It’s really kind of sad when Europe is the iPod to America’s Walkman when it comes to banking technology. This must be fixed.
The immediate answer lies in the thumbnail-sized computer chip found in my new bank card – an EMV chip. It stands for Europay, MasterCard, and Visa, the three companies that originally created the standard. Perhaps your bank has already issued you a new EMV chip-enabled card. These chip cards, unlike the magnetic stripe cards we’re all used to, can’t be counterfeited. Though not a panacea to all card-related cybercrime, they are a huge step in the right direction. EMV cards have been the standard in Europe for a decade.
While we know how to make credit cards far more secure, the urgency to embrace this technology has been lacking. Resistance to making the switch to EMV technology in the United States has, not surprisingly, come down to cost. Banks have been slow to issue new cards and retailers have been reluctant to pay for new terminals to read chip cards. For businesses that have to buy multiple terminals, sometimes hundreds, the cost is considerable. But the cost of inaction is too great. Card fraud is expected to top $10 billion in the United States this year alone.
However, we are starting to turn a corner. On October 1, we saw a shift in liability that should provide increased market incentive for banks and retailers to pick up the pace of the EMV transition. For years, a card issuer absorbed the costs associated with counterfeit fraud transactions. Now, liability for fraudulent charges rests on the weakest link in the chain. That means, in case of counterfeit fraud, retailers are responsible if they haven’t upgraded to EMV-enabled terminals and banks are responsible if they haven’t issued consumers new chip cards.
Unfortunately, while banks are making significant progress in issuing new cards to consumers, retailers aren’t moving nearly as quickly to upgrade payment terminals. That’s a shortsighted mistake. While upfront costs of upgrading terminals may be considerable, liability from a major incident of counterfeit card fraud could be crippling.
Quickly adopting EMV technology is the first, critically important step to righting the ship. More work will be needed, but ignoring modernity and technological change is the antithesis to American Entrepreneurship. We are a country of innovators and entrepreneurs, and it is past time we fix this problem.
In the spirit of modernity, maybe I will venture out this Friday to do a little shopping? While out, I’ll finally replace my Walkman with one of these new-fangled iPod things. Happy Thanksgiving.