EMV Cards: What, Where, When and Why?
Although EMV technology is relatively new in the United States, it has been used in Europe since the early '90s. In fact, EMV stands for Europay, Mastercard and Visa, the companies who developed the original program. EMV is a global standard for credit/debit card processing using a card that contains a microprocessor chip.
For Merchants this means adding new point-of-sale technology, updating their internal processing systems, and complying with a new set of liability rules. For consumers it means activating new cards and learning the new payment process. For everyone it means greater protection against fraud. In the wake of numerous large-scale data breaches and the rising number of counterfeit card fraud, many card issuers are migrating to this technology as a way to protect consumers and reduce the cost of fraud. The transition is already well underway. According to creditcards.com approximately 120 million Americans have already received their EMV cards and that number is expected to reach nearly 600 million by the end of 2015. Here are some FAQ to help you understand the changes.
What is an EMV Chip enabled Smart Card?
The EMV chip enabled cards look just like a normal credit/debit card but are fitted with a small metallic high-tech chip. This chip verifies the authenticity of the card every time it's used at a chip-enabled terminal reducing fraud perpetrated through the process of "skimming," a technique in which criminals copy the data from a card's magnetic stripe and use it to create a duplicate or counterfeit cards.
How do you use a chip-enabled card?
Making a payment at chip-enabled terminals and ATMs is a little different when using your smart card, and not all chip-enabled terminals look the same however the process is similar with each. We've all mastered the quick, fluid card swipe in the right direction however instead of swiping your smart card, you will insert it into the front of the terminal with the chip facing up and leave the card in the terminal during the transaction. This is known as 'card dipping'. Once the transaction is complete the terminal will prompt you to remove your card.
Why are chip-enabled cards more secure than traditional cards?
The magnetic stripes on traditional credit and debit cards store unchanging data. Whoever accesses that data gains the sensitive card, and cardholder, information necessary to make purchases. That makes traditional cards prime targets for counterfeiters. Every time an EMV card is used for payment, the card chip creates a unique transaction code that cannot be used again. EMV technology will make it much harder for thieves to steal your information from point of sale terminals and ATMs. If a hacker stole the chip information from one specific point of sale, typical card duplication would never work because the stolen transaction number created in that instance wouldn't be usable again and the card would just get denied.
EMV technology will not prevent data breaches from occurring, but it will make it much harder for criminals to successfully profit from what they steal. Experts hope it will help significantly reduce fraud in the U.S., which has doubled in the past seven years as criminals have shied away from countries that already have transitioned to EMV cards.
What if I have a chip-enabled card and a retailer does not have a chip-enabled terminal?
The EMV cards are equipped with both an EMV chip and a magnetic stripe. If you are making a purchase at a retailer that isn't equipped with a chip-enabled terminal yet, you can swipe your card just like you would a traditional card. Many retailers have already upgraded to terminals that read the chip-enabled cards. Many countries worldwide have already adopted this technology and have in the past shied away from magnetic stripes. If you're traveling outside of the country, just the existence of the chip will make European merchants more likely to accept transactions than if you had presented a magnetic stripe card.
What happens if fraud occurs, who's liable?
Prior to October 1, 2015 if a transaction was made using a counterfeit, stolen or compromised card, the losses from that transaction would fall back onto the payment processor or issuing bank - depending on the credit card's terms and conditions. As of October 1, 2015 (the deadline created by the major credit card issuers MasterCard, Visa, Discover and American Express), the liability will shift to the party who is least EMV-compliant in the transaction. For example, a transaction takes place using a counterfeit EMV card at a retailer who has not upgraded their system to accept chip technology thus allowing the fraudulent transaction to successfully take place. In this case, the costs will fall back onto the merchant.
Will I still have to sign or enter a PIN for my card transaction?
You will have to do one of those verification methods, but it depends on the verification method tied to your EMV card.
Chip-and-PIN cards operate just like the checking-account debit card you have been using for years.
Entering a PIN connects the payment terminal to the payment processor for real-time transaction verification and approval. Chip-and-PIN is the most secure type of credit card technology. Instead of a signature being used for identity verification, it requires you to enter a four-digit Personal Identification Number (PIN) that must correspond to information contained in a computer chip embedded within the card.
Chip-and-signature credit cards differ from chip-and-PIN cards in that you verify your identity with your signature, rather than via PIN. They are therefore not quite as secure as chip-and-PIN cards but are more so than magnetic stripe credit cards in light of the embedded computer chip. Chip-and-signature credit cards are generally accepted everywhere chip-and-PIN cards are, with the exception of certain unmanned payment terminals equipped to take chip-based cards.
According to Oberthur Technologies, the leading global EMV product and service provider, the current card production demand is on chip-and-signature cards, and it may be two or three years before fully converting to chip-and-pin. Despite the slow transition overall, those who receive chip-and-pin cards can begin to use them right away. If a terminal doesn't have the ability to accept a pin, it will then step down to accepting a signature.
Will EMV cards protect my online purchases?
The EMV chips offer enhanced security for your in-store purchases but not your online transactions. According to the Smart Card Alliance, the way EMV protects payment cards is that the computer chip in the chip card generates a unique one-time code each time the card is used. That one-time code, if it's copied or stolen from the merchant system or the terminal, cannot be used to create a counterfeit card or a counterfeit chip transaction. So the security is only there when the chip is involved in the payment transaction. When the card is used online and we're simply entering in the payment data on a computer, then you're not getting any of the additional security benefits that the EMV chip card provides
While EMV technology is not a comprehensive solution to credit card fraud, it is a step in the right direction. Until credit card security makes any more significant strides, it's important that you continue to monitor your statements for fraudulent activity and be mindful of where you're making purchases.