Have you heard of EMV technology in the credit card industry? You may even have an EMV credit card in your wallet and not know it. Although it’s not brand new, it’s a technology that is starting to generate a buzz.
EMV credit cards have been in use in Europe for quite awhile, but have not been issued as widely in the United States. However, this is soon to change due to a fraud liability shift away from the party that has EMV technology in place.
The push for the migration to the mainstream use of this technology in the United States is to prevent fraud in the industry.
EMV, which stands for Europay, MasterCard, Visa, formed in the early 2000’s as a joint effort among those credit card associations to provide secure processing and universal operability for “chip cards” around the world. Since then, the Japan Credit Bureau, American Express, Discover and China UnionPay have come on board.
EMV is a technology in which integrated circuit (IC) chips are embedded into credit cards. These cards, known as “chip cards” and sometimes “smart cards”, use this imbedded chip technology as an advanced security feature when authorizing and processing card-present (customer facing) transactions.
In traditional card-present transactions, credit cards are swiped through a terminal that reads the magnetic strip on the back and captures the data before forwarding it for authorization and approving or declining the transaction.
The magnetic strips on credit cards contain data that is static, meaning that if a security breach were to happen, all information on a credit card can be easily obtained. Once the credit card data is stolen, criminals can use the information to create an identical physical credit card.
EMV cards are processed through modern terminals that may look very similar to traditional terminals; however, EMV credit cards are not swiped through the magnetic strip reader. EMV terminals have a special EMV chip reader or port, in which the credit card is inserted. The terminal collects the card data and encrypts it differently for every transaction.
For the authorization process, typically the cardholder has to enter a PIN (personal identification number). The unique encryption method paired with a cardholder PIN verification, makes it extremely difficult for credit card data to be stolen by criminals and used for non-authorized transactions via a duplicated credit card.
Credit card fraud is on the rise. The fact that the US has been slow to adopt EMV technology provides an opportunity for fraudsters to continue to take advantage of the antiquated magnetic strip technology.
In 2012, the major credit card associations that make up EMV announced their plans to migrate the technology to the U.S. Although many banks and card issuers were immediately on board and began to issue EMV chip cards, merchants weren’t as quick to adopt the changes in the industry.
In order to enforce compliance to the use of EMV, Visa, MasterCard, Discover and American Express have implemented a liability shift date of October 2015. Any party that is not thereafter using secure EMV processing may be liable for fraudulent transactions that take place.
This means that all parties involved in face-to-face card-present transaction process, including merchants, must accept the migration, or accept the liability consequences.
The requirement for all parties, especially merchants, to migrate to EMV smart card technology will not only protect them from liability, but also make credit card processing more secure and interoperable worldwide.