Joining the Migration to EMV Cards
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If you haven’t yet heard the acronym “EMV,” or the term “chip card,” you soon will. That’s because these payment tools are steadily taking hold in the United States. Eventually, they’ll replace the magnetic-stripe payment cards many of us now use.
EMV stands for Europay, MasterCard and Visa, and refers to a global payment standard used in more than 2.5 billion chip cards around the globe. The “chip” in an EMV chip card refers to the computer chip embedded within the card.
Much of the rest of the world has already shifted from magnetic-stripe to EMV chip cards. The reason? Most chip card transactions are more secure than those done with magnetic-stripe cards.
For starters, the security features on the cards make them more difficult to copy or counterfeit. In addition, each payment completed with a chip card generates a one-time security code that authenticates the transaction. Even if someone steals this information from a specific purchase, the code can’t be used again.
Contrast that to the static verification data contained in the magnetic stripe of a traditional payment card. A criminal possessing the card, and thus the data, can copy it repeatedly and make purchases.
Although no payment method is completely immune to hackers and criminals, EMV chip cards have been shown to reduce fraudulent transactions. A 2013 report by the Federal Reserve Bank of Kansas City examined fraud in several countries that had shifted to EMV chip cards. Among its findings: In 2009, the loss rate on card purchase transactions in France, which had been using EMV payment cards for years, was 39% lower than the U.S. rate. The 2009 loss rate in the United Kingdom, which also had shifted to EMV cards, was 13% lower than in the United States.
You can tell whether you have a chip card by looking at it. The small computer chip will be embedded on the front. Today’s cards typically also have a magnetic stripe on the back, so you can use it with merchants that don’t yet accept chip cards.
The mechanics of paying with a chip card in a retail store are similar to those used with a magnetic-stripe card. Rather than swipe the card, you typically insert it — face up — in a payment terminal. You may need to sign or enter a personal identification number to finish the payment. Once the terminal indicates the transaction is complete, you can remove the card.
While the transition to EMV chip cards is underway, many terminals will handle payments made with both magnetic-stripe and chip cards. If you accidentally swipe a chip card at a terminal that accepts them, it will prompt you to insert it instead.
Many U.S. financial institutions have begun issuing chip cards to their customers. As of the end of 2014, 120 million chip cards had been issued, according to the EMV Migration Forum. That number is expected to hit 600 million by the end of 2015.
What’s more, come October 2015, many retailers and other businesses in the states that accept credit card payments must be able to process EMV chip cards. Businesses that don’t offer this capability may bear greater liability if purchases are found to be fraudulent.
The shift in the United States to EMV chip cards should lead to lower fraud rates. So if your bank or credit card provider sends you a new card and it looks a little different, don’t be surprised