EMV Chips Are Not a Salty Snack

By Megan Miller | VP/Client Services Director

By now you’ve probably received your updated credit card(s) (assuming you use them) with the shiny, foil-like EMV chip on the front – whether your card was about to expire or not. Well, you should have received. If you bank with a financial institution that hasn’t offered this up to you, know that they all had a deadline of October 1, 2015 to upgrade or merchants and card issuers will be held responsible for any future card fraud.

Now, why the EMV chip? Here’s the long and the short of it.

  • EMV stands for Europay, Mastercard and Visa – the companies that developed the technology
  • The technology was developed to significantly reduce the risk of card-present counterfeit, as well as lost and stolen card fraud
  • How so? The chip cards are nearly impossible to counterfeit. There is unique information in both the chip and magnetic strip to signal that it is a chip card. Encrypted microchips in each card hold multiple pieces of information that can be relayed between the processor and the card to create a unique code for each transaction. The transaction is then authenticated with a signature or PIN number. So far, the majority of U.S. cards will use the signature for verification instead of a PIN as it is still most familiar to cardholders and easiest to implement for card issuers

On a side note, if you travel outside the country, particularly to Europe, don’t leave home without getting a PIN number, as that is the primary means of transaction acceptance – the signature-only routine doesn’t fly. You’ll need to contact your card issuer to get one if you don’t have it already.

These chip cards have been widely distributed outside the U.S. for years. The adoption of the technology is costly and so both cardholders and merchants have been slow to transition. Naturally, with the high-profile breaches of card data at major retailers such as Target, Home Depot and Neiman Marcus, the fraud problems add up to the billions. With more years of chip card usage abroad, this technology has proven very successful in greatly reducing credit card fraud.

Is there a downside? Well, um, yes. This chip technology does nothing to address transactions made via the internet or over the phone. Word to the wise for this holiday season and beyond.