EMV -- which stands for Europay, MasterCard and Visa -- is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. In the wake of numerous large-scale data breaches and increasing rates of counterfeit card fraud, U.S. card issuers are migrating to this new technology to protect consumers and reduce the costs of fraud.
"These new and improved cards are being deployed to improve payment security, making it more difficult for fraudsters to successfully counterfeit cards," says Julie Conroy, research director for retail banking at Aite Group, a financial industry research company. "It's an important step forward."
For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems, and complying with new liability rules. For consumers, it means activating new cards and learning new payment processes.
Most of all, it means greater protection against fraud.
Want to know more about the transition and your new EMV chip-equipped credit card? Here are eight frequently asked questions to help you understand the changes.
1. Why are EMV cards more secure than traditional cards?
It's that small, metallic square you'll see on new cards. That's a computer chip, and it's what sets apart the new generation of cards.
The
magnetic stripes on traditional credit and debit cards store contain 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, who
convert stolen card data to cash.
"If someone copies a mag stripe, they can easily replicate that data over and over again because it doesn't change," says Dave Witts, president of U.S. payment systems for Creditcall, a payment gateway and EMV software developer.
Unlike magnetic-stripe cards, every time an EMV card is used for payment, the card chip creates a unique transaction code that cannot be used again.
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," Witts says.
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, Conroy says.
"The introduction of dynamic data is what makes EMV cards so effective at bringing down counterfeit card rates in other countries," she says.
2. How do I use an EMV card to make a purchase?
Just like magnetic-stripe cards, EMV cards are processed for payment in two steps: card reading and transaction verification.
However, with EMV cards you no longer have to master a quick, fluid card swipe in the right direction. Chip cards are read in a different way.
"Instead of going to a register and swiping your card, you are going to do what is called 'card dipping' instead, which means inserting your card into a terminal slot and waiting for it to process," Conroy says.
When an EMV card is dipped, data flows between the card chip and the issuing financial institution to verify the card's legitimacy and create the unique transaction data. This process isn't as quick as a magnetic-stripe swipe.
"It will take a tiny bit longer for that transmission of data to happen," Witts says. "If a person just sticks the card in and pulls it out, the transaction will likely be denied. A little bit of patience will be involved."
While chip card transactions may take a bit longer than mag stripe transactions, total card processing time will vary between merchants and eventually speed up as the new payment environment is improved.
“It will vary depending on the merchant, the equipment and the point-of-sale system,” Ferenczi said. “I think that time lag overtime will be reduced for those longer transactions.”
3. Is card dipping the only option?
Instead of dipping or swiping, NFC-equipped cards are tapped against a terminal scanner that can pick up the card data from the embedded computer chip.
"Contactless transactions are more consumer-friendly because you just have to tap," said Martin Ferenczi, president of Oberthur Technologies, the leading global EMV product and service provider. "Around the world, there is a move to make EMV cards dual-interface, which means contact and contactless. However, in the U.S., most financial instructions are issuing contact cards."
Dual-interface cards and the equipment needed to scan them are expensive. Right now, the first step is to successfully integrate EMV cards into the U.S. shopping scene. Dual interface will arrive later, according to Ferenczi.
“Dual-interface cards represent an excess of 40 percent of all cards issued outside the U.S. and I have no doubt that while we have a small base of 3 to 5 percent in the U.S. today, that percentage will grow significantly over the next year,” he said. “I think that we will start seeing an acceleration this year and further acceleration in 2017.”
