The introduction of EMV chip technology has been one of the biggest changes in the payments industry in the past decade. EMV technology is on its way to becoming an industry standard, although many vendors have not fully made the shift and integrated new EMV technology into their Point-of-Sales (POS) systems.
Even for those who have added basic EMV functionality to their POS systems are challenged by contactless and mobile payments, “quick chip”, liability shifts, and new credit card fraud schemes that add additional complexity on top of an already complex payment system.
Looking at these issues can make unfamiliar vendors ask, “What does EMV mean for my business?” and “How will EMV affect my security of sales?” Let’s take a step back and explain what EMV is, and why it is relevant for today’s vendors.
What Is EMV?
EMV is a type of smart payment card that is designed for payment terminals or automated tellers. EMV cards contain a small integrated circuit that stores the data it uses for payments. The small circuits contain information, process data and contain security keys that generate encryption codes.
EMV cards are also sometimes called Chip & PIN cards or Chip & Signature cards. The abbreviation “EMV” stands for Europay, Mastercard, and Visa, the three companies who spearheaded the standard in the mid-1990s.
The main purpose of EMV cards is to make the payment process more secure. Chip technology does this by generating dynamic security protocols that are essentially impossible to fake. Each transaction generates a new set of encryptions which makes it impossible to use counterfeit cards on POS devices.
Contrast this with traditional magnetic strip cards. Magnetic strip cards contain static data in its magnetic strip, which can easily be copied and counterfeited. EMV chip cards generate new data every time they are used which means they cannot be replicated.
What Are The Benefits Of EMV?
While not absolutely 100% uncrackable, EMV chip card technology can drastically reduce the rate of credit card fraud. In 2018, Visa reported a 76% decrease in credit card fraud from December 2015 to 2017 for US vendors who have adopted chip & PIN tech. Additionally, EMV-compliant payment methods like contactless payments and mobile payments can make the process much easier and efficient while still being secure.
What Does EMV Mean For My POS System’s Security?
One reason why EMV is relevant to vendors is because of changing liability laws. Since October 2015, if a chip card is presented at a non-chip enabled vendor and the vendor cannot process the chip card, the vendor can be held monetarily responsible for any fraud that may result from that transaction. Upgrading to an EMV compatible POS system can protect you from fraud liability.
It is important to realize that, strictly speaking, EMV is not a “security technology” for your POS system. When an EMV card is used, the card number goes to the processor of your POS system where it can still be stolen. EMV systems are fraud prevention technologies which prevent bogus transactions in the case of stolen card numbers. Even with an EMV reader setup, you still have to take steps to defend your POS system’s data from external threat.
Some steps you can take to bolster POS system security include end-to-end encryption and tokenization. End-to-end encryption involves scrambling the card number at the payment terminal before it reaches the payment processor. Tokenization means that, instead of storing card information directly on your POS system servers, it is stored on a reference number that is supplied and understood only by the payment server.
However, EMV tech does in fact make the payment process much more secure and prevents anyone from using fraudulent cards at your store. EMV tech can make your POS systems more secure by stopping fraudulent purchases directly at the front door. Also Read The Best Kiosk POS Systems for 2019 .
What Changes At Checkout With An EMV Chip Reader?
Using a chip-enabled card at the check-out terminal is not too different from using a magnetic strip. The two main changes are:
- The customer inserts the card instead of swiping it
- The card remains in the reader for the duration of the transaction.
When a customer inserts their card, the chip and the POS system communicate to figure out processing restrictions, risk, and what dynamic data to generate. The data is then sent to the card issuers, who verifies the legitimacy of the used card and gives the OK for the transaction.
This process involves some two-way communication between card and payment terminal, so it takes more time than magnetic card reading and the card has to stay in the device while the transaction is occurring. The process is sometimes called “dipping.”
Since EMV Cards Are “Dipped”, Does That Mean No More Swiping?
Not necessarily. As of now, the majority of EMV payment terminals are compatible with mag-stripe swiping, so they can work on cards from issuers who have not made the switch yet. Likewise, EMV-enabled cards still have a magnetic strip on the back, so they can be used on non-EMV payment terminals.
However, as of 2015, vendors who have not switched to EMV compatible payment terminals can be held liable for any card fraud that might occur. This means that non-EMV-enabled vendors would be required to pay back card companies the difference if any fraud occurs.
Additionally, many vendors have begun using interfaces that allow transactions via tapping the card on the device or holding it a short distance away. “Contactless” payment methods such as these use “Near-Field Communication” (NFC) to communicate data between chip and EMV terminal quicker than dipping.
Do EMV Cards Require A PIN On Credit Transactions?
No. While EMV readers have added a PIN option to credit as well as debit transactions, no card issuers currently require a PIN on credit transactions.
How Will EMV Affect The Price I Pay For Card Transactions?
Currently, interchange fees, which are the largest percentage of fees gained from credit card transactions, are not affected by EMV processing. This means that you should still be paying the same fee for each card transaction.
Does EMV Apply To Online Payments?
Unfortunately, online payments are not currently in the scope of EMV protection. In online payments, there is no physical interaction between the card chip and the EMV terminal, so no dynamic data gets generated. However there are many ways to secure data in online transactions, including end-to-end encryptions and tokenization.