As a financial services executive with more than 20 years of experience in the industry, I am rarely at odds with a sector that I consider a pillar of the economy. But when it comes to protecting the interest of borrowers and other consumers, the industry has a spotty record, to say the least.

After all, we are still picking up the pieces from the collapse of the housing market in 2007, a calamitous event that was largely triggered by the reckless issuance of subprime loans that resulted in foreclosures from New York to California after legions of borrowers defaulted.

Now, big banks are at it again, this time picking the wrong side in a debate over a technology that seeks to make credit cards more secure than they are now.

In industry parlance, the technology is known as "chip and PIN." It essentially eliminates the magnetic strip found on most debit and credit cards and replaces it with an electronic chip that contains vital information about the owner. To use it, a customer must insert the card in a new class of payment portal and then type in a personal identification number, or PIN. Hence the name: chip and PIN.



But the banks are balking. Why? It appears that they are reluctant to invest in building infrastructure to support chip-and-PIN cards, including the new payment portals that are designed to read both the chip and the personal identification number. Instead, banks prefer what is known as chip-and-sign technology. Yes, it is what it sounds like: A customer produces a card with a computerized chip and then, for the purposes of verification and security, provides his or her signature at the checkout counter.

But this is no security at all, particularly in light of high-profile data breaches at Target and Home Depot that resulted in the potential for the mass counterfeiting of credit cards once the thieves stole personal data that the companies obtained to process payments. A signature, after all, is much easier to fake than a personal identification number.

Don’t just take my word for it. Consider what Mike Cook, Wal-Mart's assistant treasurer and a senior vice president, said about the chip-and-signature approach during a recent Electronic Transaction Association's Transact conference in San Francisco, California. "Signature is worthless as a form of authentication," Cook said. "If you look at the Target and Home Depot breaches ... not a single PIN debit card needed to be reissued in those breaches. The card number was worthless to the individual thief and fraudsters, because they didn't know the PIN."

It is vitally important that this get resolved soon, because all banks and credit card companies have agreed to replace magnetic strips with electronic chips by the end of 2015. The agreement was spurred by high-profile data breaches.

