Almost a year ago, Wal-Mart began asking its customers to enter their credit card’s verification number at the POS terminal to deter credit card fraud. Although this extra layer of security is usually reserved for phone or eCommerce sales where the physical card isn’t present, it’s now the rule at 4,900 Wal-Mart and Sam’s Club stores, according to a recent article in Digital Transactions Magazine.

How does this verification code work to protect the consumer and the store?

The card verification number is used to authenticate the card in a transaction where the store representative doesn’t actually see the card itself. These codes vary from company to company, where Visa and Mastercard verification numbers are three digit codes printed on the back, American Express uses a four-digit number and has it printed on the front of the card.

It’s easy to obtain stolen credit card numbers and expiration dates through illegal channels. However, it’s far more difficult to get your hands on the verification numbers because Visa and Mastercard prohibit the “encoding” of this extra protection into the magnetic strip. The absence of this information leaves thieves vulnerable to being caught if they cannot produce the verification code at checkout.

According to the article, Wal-Mart will discontinue asking for verification codes if chip and pin cards are adopted here in the US. These cards contain an embedded microchip and are verified with a PIN number. Since chip and pin cards were introduced in France more than a decade ago, the country has reduced its instances of fraud by more than 80 percent.

Wal-Mart reports a reduction in fraudulent transactions as well, although the spokesman quoted in the article could not quantify the results.