What is EMV in the first place? At the end of this EMV chip cards guide, you will learn the answers to the frequently asked questions that you need to know.

What is EMV?

EMV stands for Europay, Mastercard, and Visa. These are the name of the three companies that created this standard smartcard payment. This standard is based on ISO/IEC 7816 and ISO/IEC 14443 for contact and contactless cards, respectively.

emv card

Back in the days, customers would hand over their credit cards and the merchant would then swipe it on a magnetic reader. The magnetic strip on the card will transmit the data from the card which is then cross checked and verified together with the signature of the client on the card. Now, card payments are possible even without the physical card itself.

Mastercard and Visa have designed a system to support Card Not Present Transactions (CNP). This is why online merchants can accept payments through the internet or through phone calls. Both companies have added extra security on EMV chip cards. Mastercard has its Chip Authentication Program (CAP) while Visa uses its Dynamic Passcode Authentication (DPA) for credit card security.

How does EMV work?
emv chip cardEMV works closely similar to chip and pin credit cards; the credit card is read through EMV credit card terminals and the transaction is then verified. However, the card is not swiped on the terminal anymore. Instead, it uses the “card dipping” method, which literally means inserting the card to the EMV card reader terminal for it to be processed.

While it takes a few seconds to minutes longer than the swiping method used on magnetic cards, the security of this method is totally worth the wait. The overall processing time will depend on the terminal, the point-of-sale system, and the transaction itself that is being transmitted to and from financial institutions and merchants.

Another method is also possible to use EMV card. Contactless reading through a Near Field Communication (NFC) terminals is doable but only when the EMV chip cards are NFC-equipped. You only need to tap the EMV card to an available terminal to proceed with the transaction. Both contact and cardless methods are acceptable around the world. Unfortunately, majority of institutions in the United States are only issuing contact cards.

Regardless if the smartcard is credit or debit, you would still need to either enter your pin or sign the card. This is highly dependent on the EMV card you’re using. However, many point-of-sale terminals are not equipped to read pins which can be a problem to EMV cardholders which are tied-up to pin verification. A large number of terminals in the U.S. still use the card and signature method but is expected to transition to card and pin in the next years.

Why are EMV cards more secure?

Compared to traditional cards, EMV chip cards are thought to be more secure. This is because magnetic stripe cards are more prone to counterfeiters once the sensitive information is stolen from the cardholder. The data from magnetic stripes can easily be replicated because it is unchanging unlike EMVs. An EMV card creates unique transaction codes for every payment made using the card. The data generated from one point-of-sale terminal cannot be used again on a different terminal.

If someone uses a code from a previous transaction, the card would be denied. The rate of fraudulent transactions in the US has dipped to 58% in March of 2017 when compared to the statistics of the previous year. This is a positive result from the EMV migration of many institutions.

There is also a more sophisticated encryption used on an EMV chip. Every data received from the terminals are encrypted right at the moment it enters the terminal. This does not happen in magnetic strip cards as data it transmits is not dynamic. However, in situations where a merchant’s terminal does not accept chip cards, the magnetic strips on EMV cards can still be used. Unfortunately, this puts the cardholder’s sensitive information at risk to security threats present in magnetic stripe readers.

What is EMV compliance?

EMV compliance is your safety net in fraudulent transactions. In case of fraud, the liability will fall under the obligation of the party that is less EMV compliant. This was set by Mastercard, Visa, Discover and American Express, the four major payment networks, since October 2015. A merchant that uses a system which does not use chip technology will shoulder all the costs for fraud. This also means that a non-compliant merchant will have to pay a larger cost than compliant merchants.

Service providers are given ample time to update their terminals in compliance with EMV standards. In a statement issued by Randy Vanderhoof, the executive director of the Smart Card Alliance, he said that “the migration challenges for implementing EMV in the petroleum environment, Visa’s and Mastercard’s modification of the liability shift dates will be beneficial to the retail petroleum industry and the U.S. chip migration.”

Can EMV be used overseas?

This would depend on the country you are visiting. For the majority of cities in Europe, EMV is widely used since a few years back. They mainly use the chip and pin card system which can be a problem for chip and signature cardholders. But the same cannot be said for merchants in the United States. There is still a significant number in the U.S. market that uses the magnetic card system. In fact, 50% of stores in the U.S are not EMV-available. That is estimated to be 2.3 million merchants countrywide as of 2017. Wholesale stores like Costco, Target, and Walmart, however, have already adapted to EMV technology.

The implementation of EMV cards has helped thwart much of the credit card fraud occurring from swiped transactions. Though much of the fraud from card not present and payment gateway transactions can still occur, the EMV chip card technology has made security a priority.  As technology evolves, we can expect to see better methods to deter fraud in many of today’s online payments.