EMV is a technology designed to add additional security for merchants and consumers when processing card-present transactions. The initials stand for Europay, Mastercard, Visa.
EMV has helped to drastically reduce card-present fraud in Canada. With new technologies and payment security methods, EMV has pushed the ball forward for safer transactions and eliminating card-present credit fraud in Canada. Let's look closer into the details of EMV technology.
What kinds of credit card transactions are common?
Transactions in which no physical card is present such as telephone, online, and in-person with no card.
Transactions in which a physical credit or debit card is inserted into a payment terminal.
In many cases over the years, fraudsters will find ways to manipulate the machines used to take card-present transactions. EMV has reduces that risk by adding more security measures during these kinds of payments (more on this below).
When did EMV come to Canada?
Canada joined the global EMV migration in 2008 in an attempt to curb a growing trend of card-present fraud issues among retailers and local businesses.
After 2008, the rate of fraud within card-present transactions would significantly change.
So, it's now 2015, what exactly happened with the integration of EMV? A brief history:
Card-present domestic debit card fraud in 2008 - $104,500,000.00
Card-present domestic credit card fraud in 2008 - $162,239,525.00
The migration to EMV terminals and chip cards didn't happen overnight. It took a few years for all consumers and merchants to update their devices to the new standard.
Over this year, consumers had new chip cards delivered to them courtesy of their issuing banks.
Merchants were required to upgrade terminals for the new technology, roughly a $200.00 investment per terminal.
Card-present domestic debit card fraud in 2015 - $16,200,000.00
Card-present domestic credit card fraud in 2015 - $51,315,783.00
Card-present domestic debit card fraud in Canada was reduced by 89.49%
Card-present domestic credit card fraud in Canada was reduced by 68.37%
So why did EMV change so much, and what is so special about this EMV era?
Two technology upgrades
The majority of card issuers offer NFC capability to newly issued EMV chip cards. The majority of debit/credit card users will gain access to tap technologies upon receiving their new EMV card.
2FA – Two-factor authentication on EMV chip cards
Two-factor authentication adds an additional step to security. Users gain access to accounts through a two-stage series. Stage One relies on providing an item the user possesses, and Stage Two is when the card user enters another item that is known by memory. Chip & PIN.
EMV chip cards are smart devices. Each payment creates a unique transaction ID that cannot be replicated. Unlike the simplicity behind reading and producing false magnetic strip cards, EMV chip cards require additional effort and cannot be replicated with the same ease.
Out with the old, in with the new
EMV Chip cards have a number of processing options which are up to the discretion of the issuing bank. Each card can be transacted with Chip and PIN, inserted and accompanied by a signature once the card is verified, as well as be "swiped" using the traditional method of “swiping” of the magnetic strip for dated terminals.
So what are the big changes to transactions?
No More Swipe
Customers classically swipe the magnetic strip from their payment card through the side of a payment terminal. This is the traditional way to process a credit card transaction, and it's being phased out more and more every year.
Chip and PIN
The action of inserting a credit or debit card into a payment terminal, followed by entering a unique PIN.
Chip and Signature
The action of inserting a credit or debit card into a payment terminal, followed by signing the receipt.
The important takeaways for consumers and merchants within the United States
1. Credit card fraud in domestic card-present transactions is steadily declining in Canada. Within 5 years of EMV migration, fraud rates dropped over 40%. EMV duplication is too costly and time consuming for the criminals.
2. Consumer payments are evolving as pressure for additional security measures and the cost of fraud increases. Issuing banks have assumed the consumer cost of cards by shipping one-time replacements free of charge.
3. The end cost for consumers is the learning curve along with a brief pause during transactions. Cardholders must adapt to inserting card chips into a payment terminal opposed to the merchant swiping the magnetic strip.
4. Merchants are required to update their payment processing hardware in order to avoid unnecessary liabilities. EMV capable terminals are typically equipped with dated technology to process magnetic strip swipe cards.