By Alan Zibel
WASHINGTON--President Barack Obama will announce on Friday that
the federal government will boost security for government-issued
debit cards, according to people familiar with the matter, amid
increased concern about the security of Americans' financial
data.
The government will start distributing federal benefits, such as
Social Security payments, via debit cards that contain an internal
chip that makes them less vulnerable to fraud, Mr. Obama is
expected to say.
The White House late on Thursday said Mr. Obama on Friday "will
deliver remarks on steps the administration is taking to safeguard
American consumers' financial security." It didn't elaborate.
The Obama administration is expected to issue an executive order
mandating a push to more-secure card technology for federal benefit
cards as a way to respond to several high-profile data breaches at
retailers and financial institutions, according to industry groups
briefed on the plans.
Industry groups have been in talks with the White House about
the issue over the past week.
The planned White House announcement was reported earlier by The
Hill.
The new cards, which are gradually being rolled out by U.S. card
issuers, will contain a computer chip in addition to the
traditional magnetic strip on the back to enhance security.
Merchants are installing new card-reading devices at the cash
register to accept the cards.
Mr. Obama is scheduled to make the announcement at the
headquarters of the U.S. Consumer Financial Protection Bureau,
accompanied by executives from major retailers and financial
firms.
The change would impact people who don't have bank accounts and
receive federal benefit payments through debit cards, including
Social Security retirement and disability payments and veterans'
benefits. The Treasury now requires beneficiaries to receive their
payments either as a direct deposit into their bank account or via
a debit card.
As of mid-2013, about 5.5 million beneficiaries received their
benefits through this debit-card program, called "Direct Express."
Comerica Inc. is paid by the Treasury Department to issue cards for
the Direct Express program.
Chip cards have been used widely in Europe, Asia and Canada for
years but they have been slow to take hold in the U.S. Recent
security breaches have renewed interest in rolling them out. Bank
of America Corp. and lender SunTrust Banks Inc. are putting chips
on plastic sent to new customers or existing customers whose cards
are expiring.
U.S. lenders are expected to issue more than 575 million
chip-equipped credit and debit cards by the end of 2015,
representing roughly half of the one billion cards now in
circulation, according to a task force that includes nine of the
country's largest payment card issuers.
Write to Alan Zibel at alan.zibel@wsj.com
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