EMV Chip Cards: Everything You Need to Know

Last Updated on April 29, 2024 by Alivia Massimillo

When it comes to credit card advancements, EMV Chips have been and will continue to be the future of card payments. While we love a good throwback, magstripes, the earlier predecessor of the credit card industry, are left where they should be; in the 1980s. They are no longer a match for the fast-moving, fraud-heavy world that we are faced with today. So, without further adieu, let’s get into everything you need to know about EMV chip cards!

What does EMV Stand For?

Europay, Mastercard & Visa are the companies who started the EMV standard, and have loaned their names to this technology, which is where the acronym comes from.

Today EMV has been expanded to EMVCo and is managed by the three founding companies among others, like JCB, Amex, and Discover.

An EMV enabled payment card utilizes the chip & pin method for processing transactions through a POS system. The chip refers to the small microchip that is embedded in the card, and users enter their pin (personal identification number) to confirm a transaction.

The History of EMV Chip Technology

EMV for credit cards was originally introduced in Europe in 2004, 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.

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.

How Do EMV Chip Cards Work?

In today’s landscape, it’s more important than ever to use EMV cards for security (more on this in the next section). To best understand how much security these chip cards offer, let’s dive into an overview of how EMV Chip Cards work. This way, you have a better understanding of the ever-prevalent technology.

At the heart of this innovation is the microchip embedded in each card, which serves as a secure storage unit for data, including account information and cryptographic keys. This microchip safeguards critical information and functions as a processing center, enabling secure transactions that protect against fraud and misuse.

The transaction process of an EMV card is another key aspect of its security measures. When a card is inserted into a terminal, the microchip communicates directly with the terminal, generating dynamic data for the transaction. This data processing ensures that each transaction is unique, significantly reducing the risk of cloning or replay attacks. By generating different data each time, EMV cards create an environment where each payment stands alone, making it much harder for malicious actors to exploit transaction information.

What are the Security Features of EMV Chip Cards?

Now that you know the ways in which the cards work, let’s review the security features.

EMV cards bring significant security advancements, redefining how we think about payment transactions. How do they achieve this? It starts with cryptographic authentication mentioned earlier, where each transaction generates a unique cryptographic code, preventing cloning and replay attacks. This ensures that even if transaction data is intercepted, it cannot be reused.

Dynamic data processing further minimizes the risk of fraudulent transactions by generating unique data for every transaction, thwarting attempts to replicate them. Additionally, the chip’s tamper-resistant design makes it resilient to hacking attempts, further securing our transactions.

This combination of features makes EMV cards a vital tool in the fight against fraud, offering businesses and consumers peace of mind in an increasingly digital world

EMV vs. Magnetic Stripe Cards:

Wondering why EMV chip cards took over the once popular Magnetic Stripe (or Magstripe) cards? Below, we hash out all the details and cover exactly when, why, and how this change came about.

First, What is Magstripe?

Magstripe is the old-school credit card swiping mechanism that you can still see on credit cards today. But initially (similar to modern gift cards), credit cards were only equipped with a magstripe and no chip. Magstripe allowed cardholders to swipe their credit card to complete a transaction, and "swiping" quickly became an action synonymous with spending money in popular culture.

Magstripe was an extremely useful innovation when it was first invented back in 1960, however, it soon became susceptible to fraud, as the data stored on magstripes (in the case of credit cards-credit card number, expiry, and CVV) is static and therefore easy to replicate when a fraudster is equipped with the right tools.

What Caused The End of Magstripe? EMV Compliance

The current adoption rate for EMV cards is only expected to increase, with more and more EMV cards issued every year. In 2020, EMV adoption was at 90% for Canada, Latin America, and the Caribbean, and in the US, nearly 65% of American cardholders were using EMV.

One of the reasons for the uptake of EMV in recent years is due to the introduction of EMV compliance by the big banks. The lack of security in magstripe transactions has created plenty of opportunities for fraudsters, and has resulted in significant losses for major financial institutions over the years. To prevent this, banks have introduced EMV compliance for merchants, meaning that all merchants are going to have to switch to using credit card machines with EMV technology, or else face potential fines.

The date for the end of magstripe readers is different depending on a few different factors, including location and what type of device your business has, but Mastercard has officially announced the end of magnetic stripes on their cards beginning in 2024, so it might be a good idea to do your research and consider upgrading your device now.

So, Is EMV More Secure than Magstripes?

Well, unlike with magstripe 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 use in any other transactions.

The standards for security that are included with the EMV chip help to protect everyone involved in the transaction, including cardholders, merchants, issuers, and processors. When EMV cards were first introduced, they had a significant impact on payments fraud because of these unique, dynamic data transaction IDs which can not be replicated. As an example, in the US, it is estimated that from 2015 to 2018, card-present credit card fraud fell by as much as 75% due to the enhanced security of EMV chip technology.

How do EMV and vs. NFC work together?

Did you know that NFC (Near-Field Communication or tap) actually needs EMV to work? The two technologies are dependent on each other. NFC actually transmits data securely from an EMV enabled chip card to an EMV enabled card reader. The only difference between a typical "chip and pin" EMV transaction is that the chip is not actually inserted into the terminal. Instead, the information is transmitted via Radio Frequency Identification (RFID).

Read more about the differences between NFC and EMV here.

The Common Issues with EMV Chips:

Like any piece of technology, no matter how beneficial it is, there are apt to be troubles along the way. That’s just the nature of the game. So, what are some common – resolvable – problems that EMV Chips possess, you wonder? There are 2 main ones.

First, Chip Malfunctions:

Over time, EMV chips can accumulate dirt or sustain damage, potentially preventing them from working correctly. These malfunctions may manifest in various ways, such as a failure to read the card or errors during transactions.

Thankfully, these issues can often be resolved through simple measures. Cleaning the chip carefully with a soft cloth can remove any accumulated grime, restoring its functionality. In cases of severe damage, obtaining a replacement card from the issuing bank can provide a long-term solution, ensuring that transactions remain smooth and secure.

Second, Reader Errors:

Another common issue involves the card readers themselves. These devices can malfunction due to wear and tear, software glitches, or improper maintenance. When a reader malfunctions, it may fail to read the EMV chip correctly, leading to transaction disruptions and potential frustration for both consumers and merchants.

To mitigate this issue, merchants should regularly maintain their card readers, ensuring that they are clean, updated, and functional. In some cases, replacing a faulty reader entirely may be necessary to avoid prolonged disruptions and ensure seamless transactions.

What are the benefits of EMV Chip Cards?

EMV chip cards offer significant advantages for merchants and customers, transforming how transactions are conducted. Let’s break down both of these below.

Benefits for Merchants

For merchants, EMV chip cards bring several key benefits that enhance both security and operational efficiency:

Decreased Liability: EMV technology shifts liability for fraudulent transactions to merchants that do not support chip-enabled transactions. By adopting EMV chip cards, merchants protect themselves from the potential costs of fraud, reducing their liability and ensuring that their business operations remain secure.

Streamlined Payment Processing: EMV chip cards provide streamlined payment processing, allowing merchants to process transactions quickly and securely. The chip's cryptographic features enable dynamic data generation, which reduces the risk of fraudulent transactions and simplifies the transaction process. This makes for smoother, faster payments that benefit both merchants and customers.

Customer Trust: The enhanced security features of EMV chip cards build trust between merchants and customers. By adopting EMV technology, merchants demonstrate their commitment to safeguarding customer information, fostering confidence in their business. This trust can lead to increased customer loyalty and repeat business, contributing to long-term success.

Benefits for Customers

For customers, EMV chip cards offer substantial benefits that improve the security and convenience of their transactions:

Enhanced Security: EMV chip cards provide robust security features, including cryptographic authentication and dynamic data processing, which minimize the risk of fraudulent transactions. This reassures customers that their information is protected, even during digital transactions.

Wider Acceptance: The global adoption of EMV technology means that customers can use their chip cards in a variety of settings. This widespread acceptance enhances convenience, allowing customers to make secure transactions both locally and abroad, making it easier to travel and shop.

Peace of Mind: Knowing that their transactions are protected by EMV chip cards gives customers peace of mind. This confidence in the security and reliability of EMV technology helps customers feel comfortable making purchases, encouraging them to engage in digital transactions without worry.

Final Thoughts

Now that you have a comprehensive understanding of what EMV payments are and how they work, all your business needs to do is ensure you're set up with EMV enabled card readers for EMV credit and debit cards in order to avoid fraud and stay compliant with new regulations. As payment technology continues to adapt and evolve, terminals and card readers will have to adapt too. The increased adoption of digital wallets and new emerging technology like pin on glass will continue to change what the payments landscape looks like-the adoption of EMV requirements is most likely just the beginning!

FAQs: EMV Chip Cards

How Does an EMV Card Differ from a Magnetic Stripe Card?

An EMV card contains a microchip, offering higher security and dynamic data processing, while magnetic stripe cards store static data.

What Should I Do if My EMV Card Doesn't Work?

Check for damage, clean the chip, try a different terminal, or contact your card issuer.

How Secure Are EMV Cards?

EMV cards are designed with robust security features, including cryptographic authentication and dynamic data processing, making them much safer than magnetic stripe cards.