Credit Cards Integrate the EMV Chip – What You Need to Know

Credit Cards with an EMV chip are the new generation of credit cards designed to protect users against credit card fraud. EMV stands for Europay, Mastercard, and Visa named for the three companies that created the standards for the technology. In this article we will take a look at what the EMV chip is and what you need to know as a cardholder and as a merchant. EMV technology has become very popular in Europe over the last few years, and throughout 2015 you will see a big shift towards this technology in the United States. EMV cards use a small computer chip instead of, or sometimes in addition to, a magnetic stripe. Read on to learn more about credit cards with EMV technology and what changes merchants, merchant account providers, and cardholders need to know about the change to credit cards with an EMV chip.

Security of EMV Chip vs. Magnetic Stripe Credit Cards

Most of us have several cards with a magnetic strip and are very familiar with the traditional swipe method for using the card. As you can see from the illustration, the EMV chip is very different, it is a small square typically located on the upper left front side of a credit card. Cards with a magnetic stripe have unchanging data embedded into the magnetic stripe. The data is read when the card is swiped through a terminal to be sent to the merchant provider. Because this data is set and never changes, it makes it relatively easy for criminals to obtain the information and then use it to create new cards or find other ways to fraudulently use a person’s account information.

In comparison, the EMV chip data is constantly changing. Cards with an EMV chip are not swiped quickly through a terminal like the magnetic strip cards. There are two different methods currently used for reading an EMV chip, the most popular method is known as “card dipping” where the card is put into a card reader and left for a few seconds until payment processor creates a unique id that specific transaction. This take a little longer than the quick swipe of the magnetic strip but the dynamic, or changing, information on each transaction makes the process much more secure. A second option for reading EMV cards allows the user to tap the card against a terminal. The different cards are known as contact or contactless. Some issuers have dual interface cards that can be read either way but the cards are more expensive to make and the card readers for contactless cards are also more expensive. Most US card companies are sticking with the contact cards initially to help make the transition easier and cheaper for merchants.

Making the Switch to EMV Chip Cards

There are a lot of questions about making the switch to EMV chip cards, both from the consumer and the merchant. As a consumer the switch to EMV chip cards wont be a huge change. Most cards will have both the EMV chip and the magnetic stripe, having both means you don’t have to worry about whether the merchant has the proper equipment to read the EMV chip. If the card reader can’t read the EMV chip you just swipe the magnetic strip as usual. Chip cards are different from debit vs credit cards when it comes to PIN verification. Rather, the equipment reading the card will determine whether or not a PIN is required. Some terminals are not set up to take a PIN along with the chip verification, in such cases the transaction will likely require a signature like most credit card transactions do currently. If the terminal is set up to require a PIN it will be the same as current debit cards where the card is read and then you enter a PIN so the merchant can get real-time verification for the transaction.

As the merchant you need to be aware of the different options and the upcoming changes. Current regulation regarding the acceptance of cards with an EMV chip has a deadline of October 1, 2015. If the merchant has not made the upgrade by this deadline the liability for fraudulent charges now shifts responsibility to the merchant. This could potentially be a huge cost for retailers that do not have compliant technology if any kind of fraud takes place on a card transaction within their business. There is a little bit of leeway for certain types of businesses, like gas pumps where the change is significantly more difficult and expensive; check with your merchant account provider if you are not sure what is required for your business.

EMV Chip Integration Worldwide

Worldwide EMV chip integration has been underway for the last several years, the US is one of the last to make the switch. According to statistics from EMVCo, as of the end of 2013:

• 2.37 billion chip payment cards are in use
• 99.9% of terminals in Europe are chip-enabled
• 84.7% of terminals in Canada, Latin America, and the Caribbean are chip-enabled
• 86.3% of terminals in Africa and the Middle East are chip-enabled
• 71.7% of terminals in Asia Pacific are chip-enabled

It was estimated that by the end of 2014 there would be more than 100 million chip cards issued to US consumers and millions of EMV capable terminals and ATMs have been installed by merchants. Currently all EMV cards also have the magnetic stripe so there hasn’t been a problem with the cards being accepted; however, people traveling to Europe may find problems with unattended kiosks that require chip and pin cards, if you have a chip signature card that is not enabled with a pin.

Overall the transition to EMV cards should be pretty seamless. Cardholders will receive information about the chip cards as the issuers send them out and merchants can contact their merchant account providers with specific questions about equipment and requirements for a specific type of business or industry.