"You have a card and you needed a PIN to use it, before and after the chip was added"

Er, no?

I guess it's possible you've actually forgotten what changed here.

It's 1995, I have stolen a VISA card issued to a nice old lady who lives across the street. I walk into a PC wholesaler which allows walk-in purchases, I hand over the card in the name "C. Smith" and walk out with two month's salary worth of Pentium CPUs that can be sold easily for almost their RRP. Did I know a PIN? Nope, just squiggled something that might be "C. Smith" on both the card and the receipt.

When her bank tells her she bought all those Pentiums, she's going to freak. And when she calms back down she'll say she never received that card. Has no idea where it is. Give her back her money.

The bank will of course insist that it's her card and surely she bought all those CPUs. But Ms Smith's lawyer doesn't need a Computer Science degree to understand what happened, and neither does the jury. Smart suit or not, "Her card was simply stolen from the post" is an easy argument to understand and she'll prevail.

Not so when the bank says her PIN was used. Who else could know her PIN? Those are secret. Aren't they?

Why didn't the store want a PIN back in 1995? Because they had no way to validate it, it would be useless to them. Only the _chip_ enables offline PIN verification, and in 1995 even some _ATMs_ were still doing offline transactions.

The transactions are not routinely On Line. Yes, I know, you had to wait 5 minutes the other day in an antique store because their card machine used a dial-up modem. Very annoying. And also quite possibly bogus, there's a good chance that wait was a charade. But why doesn't it have to be online, surely that's unavoidable?

Time for another brief lesson, this time not about history though, this all still true today:

Payment card transactions are really _two_ transactions, the banks make no real effort to correlate the two, and one is done entirely on the honour system.

1. Authorization: Does the card holder authorize this transaction? This is the one that has tightened up considerably due to fraud. But this doesn't move any money anywhere, and doesn't involve any real time interaction with a bank at all. Once upon a time this involved a machine that used carbon paper to take an "impression" of the 3D credit card, and collecting a signature. Today it's "Chip and PIN".

2. Settlement: Who should get paid, and how much, by who? This moves the actual money to the merchant. It's done entirely on the honour system, banks and merchants both routinely screw up, if your country's laws make them they'll eat the cost of fixing that, otherwise they'll probably blame you and make you suck it up. Hooray.

The first one has loads of serious technology thrown at it. Anti-replay for example. If I authorize one $14.99 payment, you can't just show that again to authorize another one.

And the second, which moves the money, undoes every benefit of the first, for example you needn't replay the authorization, just do settlement again for the extra $14.99 without any authorization at all. The bank will hand it over, the customer loses the money, unless they remember to explicitly complain about having $14.99 stolen you can just keep it. If they do complain, say it was a "mistake", you lose the $14.99 but so long as you don't do it too often you'll just get a slap on the wrist and can try ripping off other customers.