What Are EMV Chip Cards?
You may have heard about a new type of payment technology called an “EMV”
We explain how this technology keeps your personal information more secure when used at chip-enabled terminals.
A new type of credit card is on the rise. EMV chip cards are already common abroad and a variety of financial companies and retailers are working toward adoption in the United States to improve credit card terminal security. The main advantage of these cards is that it’s harder to commit fraud at a chip-enabled point-of-sale terminal with an embedded chip credit card than traditional magnetic-strip cards. We answer commonly asked questions about EMV chips and explain the security features of this type of card below.
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“What is EMV?”
“EMV” stands for Europay, Mastercard and Visa and refers to a global standard for interoperation of processing credit card transactions. An EMV card is also known as a smart card, chip card or integrated circuit card (ICC). It is a plastic card with an embedded computer chip that stores information, does calculations and makes decisions.
“When will EMV cards be the standard in America?”
EMV cards are already standard in many parts of the world, and the U.S. is starting to catch up. According to a Javelin Strategy & Research study titled EMV in USA: Assessment Merchant and Card Issuer Readiness EMV credit cards made up only 10% of the market in 2014 but are projected to reach 95% by 2018. Also the number of EMV-capable terminals is projected to grow to more than 90% in the United States by 2018. The migration to EMV is an industry-wide effort involving card issuers, merchants, card processors, merchant acquirers, and payment networks.
“Why would I want a chip card?”
The main reason many people are interested in using an EMV card is security. We’ll get into the details of chip technology below, but overall a chip card can help reduce fraud for card-present transactions at chip enabled terminals. Another main reason is convenience when travelling abroad. With Europe and the rest of the world already adopting the technology, an EMV credit card may be useful the next time you take off for business or pleasure travel outside the U.S.
EMV offers a secure way of storing and processing data. According to EMVConnection, the embedded chip in the card is a microprocessor that provides transaction security features and application capabilities not possible with traditional magnetic strip cards when used at chip-enabled terminals.
There are three main ways chip payment technology can help prevent counterfeit card use. First, the cardholder data and security keys are stored inside the chip. Even if this data was copied, it can’t be used to create a new chip with the same data. Second, with each payment transaction a one-time code called a cryptogram is generated by the chip. This cryptogram proves the card is authentic and any use of the same unique data would be detected by the issuer as fraud. Third, EMV cards use Cardholder Verification Methods (CVMs) such as a PIN or signature at the point of purchase to help ensure the person using the card is in fact the real cardholder.
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“What’s the difference between a chip-and-signature and a chip-and-PIN card?”
EMV cards can verify the cardholder either with a signature or four-digit personal identification number (PIN). A chip-and-PIN card requires the cardholder to enter the PIN at the point of purchase and this code must correspond with the information on the chip for the transaction to process. If someone steals your chip credit card they won’t be able to rack up charges without the PIN. Chip-and-signature cards require the cardholder to provide a personal signature at the point of purchase.
Discover’s own research in 2013 showed that as the European Union completed its migration to EMV, the region saw a 80% reduction in credit card fraud while the U.S. saw a 47% increase.