EMV: Everything You Need to Know

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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. 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.

What is Magstripe?

Magstripe is the old-school credit card swiping mechanism which you can still see on credit cards today. But originally (similar to modern gift cards), credit cards were only equipped with a magstripe and no chip. Magstripe allowed cardholders to swipe their credit card in order 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 all the way 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.

When and Why Did We Get EMV?

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. 

What is the EMV Liability Shift?

In 2015 banks introduced the EMV liability shift which passed liability for fraudulent transactions processed without an EMV card reader on to merchants. This meant that if a business owner swiped a stolen chip card because they were not set up to accept EMV chip cards (i.e. using an old magstripe reader), then they became responsible for the fraudulent charge.

Now, if your business is able to accept EMV chip cards and you inadvertently process a fraudulent transaction using the EMV chip, then the issuing bank will take responsibility for the fraudulent charge. Why? Because by using the latest acceptance tech and ensuring the card was present and the chip used—you’ve done all you can to prevent fraud. The EMV liability shift is old news in 2021, but it paved the way for EMV compliance, which is coming down the pipe this year.

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 card readers 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, so it might be a good idea to do your research and consider upgrading your device now.

Is EMV More Secure?

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 security standards that are included with the EMV chip help to protect everyone involved in the transaction then, and this includes 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 ID’s 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.

EMV vs. NFC

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).

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!

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