Magazine article American Banker

Magnetic-Stripe Data Underused, ATM Report Finds

Magazine article American Banker

Magnetic-Stripe Data Underused, ATM Report Finds

Article excerpt

Banks are losing $1 million a month to scams targeting automated teller machine cards, but many of these crimes could easily be thwarted using security features already built into the cards, a report says.

The report's author, Avivah Litan, a vice president and research director at the Stamford, Conn., market research firm Gartner Inc., estimates that only half of all U.S. banks are using the features written on one of the tracks on an ATM card's magnetic stripe.

The first track, which all banks use, includes the customer's name, the card number, the PIN, and the expiration date. If a bank's ATMs read only the first track, a criminal needs only that information to manufacture a counterfeit card, according to the report, which Gartner will release today.

The second track includes additional data that is not revealed to the customer, such as the PIN offset number, which is used to verify a customer's PIN, and the Card Verification Value.

Some bankers say that using the data on the second track poses a classic argument of convenience versus security.

Mike Marzac, the manager of electronic banking at First Horizon National Corp. of Memphis, said it does not to use the PIN offset number to verify cards, because doing so presents customer service issues.

Because the PIN offset number must be changed at a branch or by the card manufacturer, banks that use the number cannot offer some common ATM card management services, Mr. Marzac said. For example, "if you allow a customer to change their PIN at an ATM, an Internet banking site, or ... [by phone], you can't put that PIN offset" on the stripe.

First Horizon lets its customers change their PIN online or by phone, he said.

However, it does use the CVV to verify that a card is not counterfeit, Mr. Marzac said. Customers do not know that code, so they cannot inadvertently reveal it, he said. …

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