"The move by MasterCard just enhances the sense of security for people at a time when it has been shaken up significantly in recent times," said Gil Luria, an analyst with Wedbush Securities.
Zero-liability protection currently covers card transactions that require a customer's signature but does not apply if an account holder's personal identification number (PIN) was used for unauthorized transactions. The new policy will take effect in October.
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Zero-liability protection means the account holder will not be held responsible for unauthorized transactions.
Larger rival Visa's zero-liability policy does not apply to PIN-based and ATM transactions, according to information available on the company's website.
"The changes that we're making in cardholder protection combined with our efforts to move the U.S. payments industry to EMV chip technology will help deliver safer shopping experiences to consumers," said Chris McWilton, president, North American Markets for MasterCard.
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The two companies have urged banks and retailers to meet an October 2015 deadline for the adoption of ``EMV'' chip technology that would make it safer to pay with plastic.
"This all comes back to the adoption of EMV. Of all the cards that are breached at ATMs, a majority of them are non-EMV cards. This is just another way for the company to impress upon the importance of quickly adopting EMV cards," said Philip Philliou, managing partner of Philliou Partners, a firm that helps banks and retailers select payment processors.
U.S. cards issued by MasterCard will also carry identity theft resolution assistance, which helps cancel missing cards, alert credit reporting agencies and conduct searches to detect if stolen confidential data appears online, MasterCard said on Wednesday.
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The financial impact from the extension of the coverage is expected to be minimal for MasterCard, according to Luria.
MasterCard shares were little changed at $77.17 in late-morning trading on the New York Stock Exchange on Wednesday. (Click here for the latest quote.)