Credit Card Processing Blog

EMV Tutorial 101 – The Growth Of The Smart Chip

September 02, 2016 10:00 AM / by Reliance Star

EMV cards are fast replacing traditional swipe-and-sign credit cards all over the world. EMV stands for Europay, MasterCard and Visa, and the technology behind it means that a tiny, smart chip is embedded in the card, and it is this chip that contains the cardholder’s account information.

EMV cards offer a far more secure method of payment since they are extremely difficult for fraudsters to duplicate and abuse. With financial loss as a result of fraud being a huge concern to merchants and banks, the EMV liability shift is another reason more and more businesses are signing up for EMV chip security technology.

An Insight into the New EMV Liability Rules 

From October 1, 2015, new laws have determined who is responsible for any financial liability resulting from fraudulent or counterfeit card-present transactions. Known as the EMV liability shift, it means that whoever is least compliant with EMV technology is now responsible for any financial loss incurred as a result of a fraud during payment processing. So, if a customer has an EMV card but the merchant has a legacy reader or a terminal that is not enabled for EMV technology, the merchant is responsible for any financial loss that results. If a customer has a standard magstripe card but the merchant has an EMV reader, then the bank that issued the card is liable for the loss.

Advantages of Implementation

  • EMV cards are very difficult to duplicate and countries that use them have seen retail fraud fall dramatically.
  • Card issuers and merchants could be liable for the financial loss, or face stiff penalties, in the event of fraudulent activity taking place.
  • If you have not made the switch to EMV technology, but your competitors have, you could find your customers going elsewhere.
  • Similarly, if you are one of the last to implement EMV technology, you could find yourself a target for criminals seeking to commit fraud.
  • Where 75 percent of transactions are processed through EMV-enabled readers, some card brands will waive your Payment Card Industry Data Security Standard (PCI-DSS) audit. 

How It Works 

EMV cards look just like traditional credit cards, but they have a chip instead of a magnetic strip. Some EMV cards do have a magnetic strip as well.

  1. The cardholder presents the card at the point-of-sale device and is asked to insert it into the terminal.
  2. The cardholder must be physically present at all times and the transaction usually takes seconds from start to finish.
  3. He or she either signs a printed receipt or enters a four-digit personal identification number (PIN) into the keypad. The second option is probably the best in terms of security because it is easier to forge a signature that it is to guess somebody’s PIN. Without the correct PIN, the transaction cannot go ahead. 
  4. The sale is verified and the transaction is complete; the customer receives a receipt to confirm this.

In order for businesses not to fall foul of the EMV liability rules, they should look at integrating EMV technology at their sales points. The result will be far fewer occurrences of fraud and more security for businesses and their customers.