Journal: News & Comment

Paperless and mindless: poor reporting on new money technology

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I just returned from a week-long vacation in the U.S.A., and one of the minor cultural differences I find amusing is how many people still use paper checks (or, as we call them here, cheques) there. Here in Canada, they're still common for paying the rent and other relatively infrequent transactions, but at any retail outlet, and particularly grocery stores, anyone trying to write a personal cheque will get a quizzical look: we generally use debit cards.

We also usually call them "Interac" transactions, after the national consortium that permits inter-bank transfers within the Interac Direct Payment system, and withdrawals from other instututions' automated teller machines. (In the U.S., I often hear the term "check card" instead, which just seems funny up here, in the "horseless carriage" sense.)

Today on CBC radio I heard a news story about Interac of the type that annoys me: a puff piece of "reporting" that simply parrots a new industry initiative with no analysis whatsoever. The Interac Group is moving to have microchip smart cards in use instead of the traditional magnetic stripe types. That makes sense, because the chips are (probably) harder to copy than the old stripes. But the CBC story just reported that straight, with no questions or discussion. I wondered:

1. Why is this story an issue now? Interac announced this initiative a year and a half ago (with preparatory work since 2002), and nothing is supposed to happen for Interac customers until at least 2007.
2. Will there be transitional cards with both stripes and chips? (Checking with the Interac website, the answer is yes.) It's going to take a long time to replace all the card readers and teller machines in Canada, not to mention all the other places around the world where I might want to use my card. But if the new chipped cards also have stripes, doesn't that make the "more difficult to copy" benefit moot?
3. Is the chipped smart-card standard compatible with other such standards around the world? In other words, when I get my new smart Interac card, will I still be able to get money out easily at an ATM in Australia or Russia once the magnetic stripe technology finally does fade away between 2012 and 2015? In other words, is this an international standardization effort, or a one-off Canadian thing that's just going to end up annoying? (It seems that yes, there is a standard. Good.)
4. Is the smart card technology at all related to RFID tags? I hope not, because I don't want my bank card to be readable remotely, especially since it's already been demonstrated that RFID chips can be scanned and spoofed. (They seem not to be related, but I couldn't tell for sure.)
5. The reporter blindly repeated the figure that over the most recent two years of data available, there were $44 million and $70 million of fraudulent Interac transactions in Canada. That seems like a lot, but she also noted that there are 35 million debit cards in use in Canada. So that's up to $2 per card per year. Some third-party ATMs charge me more than that for a single transaction, so it doesn't seem that the fraud rate is really the motivation behind the new chips. So what is the motivation?
6. Why didn't the CBC reporter address at least one of these questions?

To its credit, the story got me asking. But I thought reporters were supposed to dig a little, not just spew the press release right back out.

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