EMV chip technology has become more prevalent in the news lately, primarily due to recent massive credit card data breaches at some national retailers. There is a general lack of education in the market surrounding this technology and how it is now affecting and will more significantly affect card marketers and consumers in the relatively near future. Here’s a primer to get you started.
What It Is
EMV, named after its original developers and signifying Europay, MasterCard® and Visa®, is technology that embeds microprocessor chips that store and protect cardholder data in credit cards, mobile phones and other devices.
EMV technology ensures that chip-enabled cards work with POS terminals and ATMs from country to country. A chip payment credit/debit card looks just like a traditional card, but has an embedded chip in addition to the magnetic strip on the back of the card. Whereas magnetic strip technology is easy to crack, an EMV-enabled device features dynamic authentication capabilities. Simply put, this means each transaction carries a unique “stamp” which prevents the transaction data from being fraudulently reused, even if it is stolen from a merchant or processor’s database. Plus, a signature or PIN is usually required to confirm identity, enhancing authentication of both the card and cardholder.
A Brief History
As of 2012 EMV technology was used in about 45 percent of payment cards in circulation globally, and 76 percent of POS devices. The Single Euro Payment Area (SEPA) and Canada have transitioned to nearly 100 percent EMV, and Asia, most of Latin America and countries like Brazil and Mexico are well advanced in migrating to it. The United States has seriously lagged in acceptance of the standard primarily due to lack of consumer knowledge/interest, the added costs associated with re-issuing cards and merchants’ resistance to upgrading POS equipment. A few major card issuers are making chip cards available, but they still include a magnetic strip for use in the U.S.
Because of EMV’s global penetration, traditional magnetic strip technology is quickly becoming outdated outside the U.S. and over the last few years has created numerous payment problems for many U.S. cardholders traveling abroad.
Coming in October 2015
Currently in the U.S., banks are responsible for credit card fraud. But in October 2015, that liability will shift. In the new scenario, merchants who haven’t upgraded their checkout equipment to process transactions made with chip-based cards will be responsible if fraud occurs on those cards. Visa, Discover and MasterCard have already announced roadmaps for the liability shift.
As acceptance inevitably begins to rise in the U.S. – likely fueled by next year’s liability shift – card marketers should be arming themselves with new positioning and messaging to help educate cardholders about EMV and promote its enhanced security benefits.