Among the many tools that enterprises and financial institutions are implementing in order to protect their clients and customers from fraud and other activities perpetrated by criminals, EMV technology has emerged to become one of the most important and groundbreaking. Cards embedded with EMV chips are now being used by many financial institutions, including payment card companies, banks, and credit union interbank networks.
EMV stands for Europay, Mastercard, and Visa, the financial institutions that were responsible for creating this technical standard that is now used in more than 80 countries. EMV cards are smart cards that offer more security for the users because it stores information not only on the magnetic stripes commonly found in conventional payment cards, but also on the microchips found within the cards.
In the United States, migration to EMV-enabled cards had been slow in the beginning, but with the country’s payments industry now moving mountains to make the cards available to all customers, the country is now on track to achieving widespread adoption of these cards. The Payments Security Task Force estimates that by the year 2017, some 98 percent of the credit and debit cards being used by 8 large American financial institutions will be embedded with EMV integrated circuits.
As will be explained below, EMV migration offers two main benefits.
Reduction in face-to-face transaction fraud
Face-to-face transaction refers to a type of payment transaction that occurs when a cardholder issued with a payment card is physically present during a transaction. It is also known as card-present transaction and differs from card-not-present transaction, which is what happens when a cardholder engages in activities like mail order, telephone order, or e-commerce.
Face-to-face transactions are generally considered safer because the merchant is able to visually verify if the cardholder is indeed authorizing the transaction. However, they are not 100 percent secure. The data contained in a card that is not EMV-enabled can be easily skimmed or copied using card reading devices. Such devices can be secretly fitted into automated teller machines (ATMs), where they are camouflaged to look like genuine parts of the machine. These devices can copy the unwitting customers’ private bank details, which the thieves can then use to steal money. Card skimming can also happen in business establishments like restaurants and shops, where cardholders provide their cards in order to run the charge. The thief—typically the employee who takes the cards from customers—can then use a skimming device to steal the customers’ information.
EMV technology is effective at detecting counterfeit cards because it allows the merchants’ point-of-sale devices to verify if the card is authentic and not just a copy of a card whose data has been skimmed by criminals. In fact, when MasterCard compared the January 2015 and January 2016 fraud reports of the U.S. merchants that use their services, they found out that counterfeit fraud at chip-enabled merchants has been reduced by 27 percent in terms of total U.S. dollar volume.
EMV becoming global standard
EMV technology has been in use in Europe since 1992. In fact, the United States is one of the few developed countries that have been quite slow in terms of widespread adoption of EMV technology. As mentioned, more than 80 countries in the world today have transitioned to using this technology, and it has reached a point when it is now the prevailing payment standard globally.
As countries slowly phase out magnetic strip cards and as major payment brands work to ensure that merchants who have not made an effort to invest in chip-enabled technology are held liable for losses associated with fraud, migration to EMV-enabled cards and devices is slowly becoming an absolute must. In any case, the transition will also make it easier for Americans to conduct payments and to access their accounts, especially when they travel abroad.