Editor’s Note: This blog entry was originally published on August 2, 2016, and was updated on January 18, 2022.
Have you ever wondered about the technology behind credit cards? Do you know the difference between cards with a magnetic stripe and those with a chip? Our guide to EMV technology answers those questions and more.
What does EMV stand for?
EMVⓇ stands for Europay, Mastercard, and Visa - the three companies that were the initial founders of the standard. They were later joined by American Express, Discover, JCB, and UnionPay, forming EMVCo. Now, EMVCo develops and manages specifications to support the global use of secure technologies for payments.
What is EMV?
EMV is a technology that helps provide security on credit and debit cards. Often referred to as “EMV chip cards” or “smart cards,” these EMV cards use a chip to store information, rather than the less-secure magnetic stripe card, or “magstripe” card.
How does EMV work?
With an EMV credit card, the customer “dips” the credit card into a slot on the point-of-sale (POS) terminal, rather than swiping as they would with a traditional magstripe card. The chip then generates a unique transaction code that cannot be used again.
Types of EMV payment methods
There are three main types of EMV payment methods - contact, contactless, and mobile.
An EMV contact card is the typical credit card featuring a smart chip, and it is used in card-present transactions by the customer dipping it at the POS terminal.
EMV contactless cards also have a smart chip, but they can be used by a “tap and go” method at the terminal, rather than customers having to dip the card.
Mobile EMV is when a customer’s payment credentials are stored on a mobile device or wearable, such as a smartphone or a smartwatch. The customer uses the mobile device similarly to how they would use a contactless card - by tapping or waving it at the POS terminal.
Benefits of EMV
This technology has many benefits for customers and businesses alike, including increased security, global use, and convenience.
Because of the unique code that chip cards generate for each transaction, they are more secure than magstripe cards. Magstripe cards store static data - meaning that the data remains the same. This allows hackers who steal data off a magstripe card to use the card multiple times.
With a chip card, the data changes - the transaction code generated for a purchase is a one-time-use code that is not usable for a subsequent purchase. If a hacker tries to steal data off a chip card, they would not be able to generate a new code, and the card would therefore be denied when they attempt to make a purchase.
EMV has become the worldwide standard for payments, with nearly 100% compliance in some areas of Europe and Canada. When traveling internationally, customers may not be able to pay with magstripe cards - whereas chip cards will likely be accepted.
Customers enjoy the convenience contactless payment methods give them. “Tap and go” transactions are quick and easy, and with mobile EMV, customers don’t even have to have their credit card with them - they can pay with their mobile device.
The EMV liability shift
In the United States, the EMV liability shift occurred in October 2015. Prior to this, if credit card fraud occurred during a transaction, any losses were passed on to the card issuers, and the merchant was not responsible.
After the liability shift, merchants are now responsible for any losses that may occur if they process cards that are not EMV-enabled.
An exception was made for gas stations due to the time and expense required to produce and install new hardware such as EMV card readers at gasoline pumps. Gas stations were originally given until October 2017 to comply with the shift. Due to logistical and supply difficulties, that deadline was later extended to October 2020. With the onset of the pandemic, the deadline was further extended until April 2021.
Usage of EMV technology has increased greatly, largely due to its superior security. Between 2015 and mid-2019, the usage of this technology helped decrease card fraud by 87%.
By the end of 2021, EMVCo found the following usage statistics:
- In the United States, 73% of card-present chip transactions are EMV-enabled; that number increases to 86% globally.
- Over 1.6 billion cards in the United States use EMV Specifications; with over 10 billion cards doing so globally.
While much attention has been paid recently to newer payment methods, many consumers still use credit cards as their preferred form of payment. ISVs need to ensure their software solution includes EMV functionality for their merchants. Global Payments Integrated can help ISVs offer their merchants functionality for over 150 different payment methods - contact us today.
EMVⓇ is a registered trademark or trademark of EMVCo LLC in the United States and other countries. www.emvco.com.