The Magstripe Standard
Everyone is familiar with the traditional swipe method of processing transactions. “Swiping” has become synonymous with credit cards to the point where the mobile card readers of today are affectionately referred to as “swipers.” This is called the magstripe standard, and it refers to the magnetic data stripe on that back of the credit card. The magstripe basically holds within it all of the information that exists on the physical credit card itself, and when it is swiped, it communicates all the card information to the terminal or reader. While this standard way of processing credit cards still exists today, it is slowly being supplanted by what is known as the EMV standard and its accompanying payment technology.
EMV, which stands for “Europay Mastercard Visa,” after the companies who created it, is the new technology standard that involves using “chip cards.” The chip refers to a small microchip embedded on the front of the card that is very difficult to duplicate, certainly much more difficult than reproducing the magstripe data.
The goal of EMV is to reduce card-present credit and debit card fraud, and has generally been successful in accomplishing this wherever it's been adopted. EMV was originally introduced in Europe in 2006, and in Canada in 2010. Canadian Interac Debit also changed over to the EMV standard in 2010. The US followed suit with the EMV liability shift in October 2015.
EMV is often referred to as "chip and PIN" or “chip and dip” because the most common way to use an EMV card is to insert - or “dip” - the part of the card with the chip on it into an EMV enabled terminal and enter your personal PIN. However, this is an oversimplification of the EMV standard, which also encompasses other transactions modes such as “chip and signature,” where customers enter a card into a terminal and then sign instead of entering a PIN, as well as “Tap & Pay” (near-field communication or NFC), where customers “tap” a chip card against the terminal to pay for a purchase.
Is swipe going away?
Swiping a card to process a transaction will become increasingly less common as more businesses update their terminals and equipment to be able to accept chip cards instead. In April of 2018 Mastercard, Discover, and Amex all announced that you are no longer required to collect signatures from customers when processing transactions. You can still swipe credit cards but doing so will expose your business to the risk of fraudulent transactions, and you may be liable if the card was stolen. Most chip cards do still have the magnetic stripe on the back of the card as merchants transition towards accepting EMV chip card technology. We do not yet know when, or if, the magnetic stripe will be phased out completely.
What about manually keyed and ecommerce transactions?
The EMV technology does not impact card-not-present (ecommerce) transactions as it only deals with card-present (retail) transactions. The policies in place for manually keyed transactions have not changed so they are not impacted by EMV chip card technology. However, this can change the way fraudsters target businesses, and fraud may shift towards keyed in and ecommerce transactions, so you should ensure you are using best practices for these payment methods.
How can I accept EMV transactions?
You simply need a credit/debit machine that supports EMV chip card transactions. When customers are ready to pay, they use an EMV chip-enabled card and insert the card into the terminal and enter their PIN to complete the transaction.
Why should I accept EMV transactions?
Accepting EMV transactions at your business helps you protect yourself from potentially fraudulent transactions, and dramatically decreases your exposure to fraud in general. Fraudsters have traditionally targeted regions and businesses that still use the magstripe standard for processing credit cards, so it just makes sense to avoid painting a target on your back.
How will this affect my customers?
Your customers have probably already experienced paying with their credit cards in a multitude of ways. Your customers will have likely been previously prompted to enter their PIN for a transaction, sign their signature to verify, or have experienced contactless payments for their credit card transactions, so it’s likely they will actually welcome some consistency in the way they pay.
If your customers have a chip card but do not know their PIN or have forgotten it, remind them that a credit card transaction is completed with the same PIN they would use at an ATM.
If your customers express any confusion or frustration, you can reassure them by citing the added security of both the transaction and their personal information, which is safeguarded much more securely with EMV transactions. Chip card transactions, especially tap and pay transactions, are also much faster than traditional swipe and signature transactions and cut down checkout times significantly, as they no longer need to provide a signature or wait for the receipt to print.
How does EMV combat fraud?
The technology used in the chip card makes it more difficult for fraudsters to create fake debit or credit cards because the chips in the cards are very difficult to replicate. Unlike with magnetic stripe cards where the data stored in the magnetic stripe is static, EMV cards use dynamic data which means each transaction will have unique data that can’t be replicated by fraudsters for any use in any other transactions.
What if a customer doesn’t have an EMV chip card?
The decision to accept the card by swiping it is up to you. If the customer doesn’t have a chip card, you can always ask for another form of payment. More and more banks in the US are issuing chip cards to their customers, so they will gradually replace cards that can only be swiped. If your business operates in Canada almost all customers will have been issued an EMV enabled debit and credit card. Customers in the US are still behind but the card brands and banks in the US are making a big push to issue more EMV enabled cards in 2019.
If you have any questions about chip cards, don’t hesitate to reach out to our friendly team of Helcim gurus who are happy to help.