Nothing. This 'feature' is entirely designed to reduce the banks' liability. It shifts the onus of security onto you (from the banks and the merchants).
It sounds like in principle it might also reduce fraud overall. Thus, maybe 80% of the fraud goes away and 20% remains, but that liability is shifted to the consumer rather than the bank (who otherwise passes it to the merchant anyway). If the merchant has reduced fraud liability, they may be able to offer lower prices. So, in principle there might be a long-term win for the consumer. In practice, who knows.
I think the idea of a pin at checkout is a good one to reduce fraud. However this is more work for the consumer, and reduces the bank's liability. Most consumers would probably prefer this, as it makes their card more secure and reduces the possibility of fraud hassles, which are annoying regardless of liability. Having something that is more work for the consumer and could save the bank money switch the liability to the consumer is just obnoxious.
There is now Chip and pin fraud. With chip and pin the liability is now on the consumer to prove it wasn't their transaction. Customers have had to take the banks to court in the UK to get fraud losses removed. In these cases it has been proven that Chip and pin is infallible. Same applies online with 3-D secure.
> I think the idea of a pin at checkout is a good one to reduce fraud.
For in-person transactions, merchants can check your signature against the one on the card or alternatively ask to see a photo ID. The process is there, though it's hardly ever done.
Given the fact that your signature is on the card, this seem rather ineffective. Approximate signatures are easy to forge and no merchant will deny a transaction based on a different signature.
In fact, that is not the purpose of your signature. The purpose is that you are signing a contract and agreeing to pay. It has nothing to do with security or fraud and merchants are not supposed to check signature matches - only that you signed.
A smiley face is a valid signature, as long as it is you and you agree to the credit card contract.
Actually, signing the receipt has everything to do with fraud. If you use a credit card in a transaction you are required to pay regardless of whether you sign an agreement saying so. The difference is, if the merchant does not collect your signature, they are liable for any chargebacks AKA reports of fraud whereas the bank would be if the merchant did collect the signature. [1][2]
My point in bringing up the signature line on the back of the card is that, while it might not meet your personal standard of effectiveness, it is an example of "a pin at checkout is a good one to reduce fraud. However it is more work for the consumer, and reduces the bank's liability."
Signature verification is an old-fashioned, and perhaps imperfect, nonetheless established method of security.
If you have ever used traveler's checks, you will know that they also use signature-matching as the method of security/verification.
Because if you did not sign, there is no written contract for that transaction, so there is far less of a case that the charge is valid. Regardless of what the signature looks like, you are liable if it was you (or someone you authorized) who signed and you are not liable otherwise. You are even liable if you charged for the transaction but did not sign - there is just no written, signed contract, so you are presumed not to have agreed to the charge.
None of the above is legal advice as IANAL, however I do believe it is correct.
Do you really think a merchant can verify those electronic scribbles on a tiny, crappy pen input device? No. Any mark made by you with the intent to sign is a legal signature.
