New plan to cut down on credit card fraud

The days of entering your credit card number to shop online may be over.

In an unusual move, archrivals Visa, MasterCard, and American Express are proposing a new industry standard to make online shopping more secure. While the details are still being decided, this interoperable technology will likely center on the use of digital payment “tokens” for online and mobile transactions.

In plain English, that means you’ll have to complete a one-time set-up for each device you have — laptop, PC, tablet, smartphone — thus giving it a unique code and tying it to your credit card. The token then eliminates the need for a merchant to have your credit card number at all.

Even better, the system is going to be a worldwide standard that will be rolled out over time. It’s a win for you because so much credit card fraud takes place after you give a merchant your credit card number. And it’s a win for merchants and the credit card companies as mobile payments really take off. So all in all, this is a great new plan to cut down on credit card fraud.

According to the latest data from the U.S. Census Bureau, only 6% of all retail sales were mobile in 2013. But that number has grown by some 200% since 2004, and it will only keep growing from here.  

Credit card fraud has been out of control. It’s about time someone came up with something like this. Will it be a foolproof system? Of course not, the smart crooks will adapt. But by eliminating stores having your credit card number, this will already be inherently better than the system we have in place now. 

For further reading:

• Credit Freeze and Thaw Guide
• Protect yourself when you pay debit