personal identification number

For debit card fraud to occur, a robber needs two things: the account information found on the user’s card’s magnetic strip and the user’s PIN. According to police, the PIN can be obtained in a number of ways, including stealing the user’s wallet and finding the PIN written on a paper in it, or watching a user enter the PIN into an ATM machine and then stealing the user’s card.

Another trick used by fraud artists is to have a legitimate-looking store clerk skim the card on a legitimate point of-sale terminal and then skim it again on an illegitimate card reader designed to store information embedded on the card’s magnetic strip. Though the initial sale will be sent to the financial institution, giving the PIN user the idea that everything is okay, the criminal will then make a new card with the personal information stored on it and use the PIN that had been entered by the legitimate user (and captured on film by an overhead camera) to fraudulently purchase goods and services with the fake card. The legitimate card user typically calls the police when he or she discovers that large sums of money or the entire amount thought to be in the user’s account no longer exists. One such PIN scam occurred in Ajax, Ontario, Canada, in December 2004, at a gas station that engaged in such illegal practices.

Victimized users sometimes find that after informing the bank of the missing account funds, the bank investigator might ascertain that the user failed to take appropriate protections to safeguard his or her PIN. The bank therefore might not replace the stolen funds. Such moves hurt consumer loyalty.

It is for this reason that in 2004, credit card companies began urging merchants to buy into a new payment method allowing consumers to use their plastic cards without swiping them through a machine and inputting a PIN. On May 19, 2005, J.P. Morgan Chase & Co., the largest credit card issuer in the United States, announced plans to distribute millions of new cards that simply need to be waved or held in front of a special reader. Such a card can also be swiped through the more traditional machine. The technology is known simply as “blink.” The cards contain a special chip recognized by the merchant’s terminal. When clients wave their cards in front of the machine, the card reader lights and then beeps to signal that the transaction has been authorized. The card never needs to leave the client’s hand. Visa, MasterCard, and American Express have agreed to accept any card equipped with “blink.”

See Also: Fraud; Identity Theft or Masquerading.