EMV Cards Backgrounder
About Chip-based Payment Cards
A chip card is a standard-size credit card plastic with an embedded microprocessor chip that stores and protects cardholder data. If your card is lost, stolen or compromised in a data breach, the embedded microchip makes the card extremely difficult to counterfeit or copy.
Although chip cards are not common in the U.S., this technology has been used around the world for many years. Some U.S. banks already issue chip cards.
The global standard is called EMV, short for Europay, MasterCard, Visa. There are currently more than 1.5 billion chip-enabled cards issued across the world.
Implementation by October 2015
Visa and MasterCard have issued upcoming rules and guidelines for processors and merchants to support EMV chip technology, including a liability shift. Once this goes into effect in October 2015, merchants who have not made their equipment EMV-compatible may be held financially liable for card-present fraud that could have been prevented with the use of a chip-enabled POS system. ATM owners accepting MasterCard have until October 2016 to upgrade their machines; Visa has given ATM owners until October 2017. Gas station owners have until October 2017 with both networks.
The U.S financial system is complex. There are thousands of financial institutions issuing cards and hundreds of thousands of retailers. Card issuers will have to replace all magnetic stripe cards with chipbased cards. Retailers will have to install new POS terminals. In addition, more than 400,000 ATMs will have to be updated.
The EMV chip generates an encrypted, one-time-use digital key for each transaction. Stolen account information cannot be used to create a fake chip card.
However, EMV does not prevent or deter fraudulent card-not-present purchases, such as online shopping. Most card fraud in the U.S. takes place in card-not-present transactions.
Payments fraud is an evolving challenge, with criminal networks constantly seeking new ways to exploit perceived weak links in the system. For example, evolution to EMV is only one proposed step in the fight against fraud and has been around for nearly two decades. As criminals adapt to changing protection systems, new counter-measures are being developed.
There is no single solution for the ever-changing threats that exist today, or that can anticipate what new challenges will come years from now.
Future of Card Security
Extensive efforts are already under way to improve card security, including the implementation of EMV standards and—another popular fraud prevention technology—tokenization (a one-time-use digital code). Tokenization would prevent card account information from being passed through retail systems and help prevent card-not-present fraud.
These changes require significant financial investment by all parties—and have been the subject of some criticism by many, including parts of the retail industry—but are moving forward.