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How Does the New EMV Credit Card Chip Work?

EMV (Europay, MasterCard® and Visa®) chip technology is fast becoming the worldwide standard for credit card and debit card payments. Milllions of consumers have been issued new cards that look quite similar to the old cards. However, these new smart cards come with a small, metallic square in the corner of the card. The square is a tiny microprocessor computer chip that includes secure payment instructions stored in the credit card chip.

The drive for this new technology has been due to the significantly large data breaches that have occurred at stores such as Target, Home Depot and Michaels. These devastating breaches put into motion a push within the industry to get rid of cards with the magnetic strips in favor of embedded chips that store the cardholder’s data.

It is well documented that the magnetic strips on traditional credit and debit cards contain unchanging data. Once this sensitive cardholder information is accessed, it can be used to make fraudulent purchases. EMV chips store the sensitive cardholder data behind a security encryption. This means the information is constantly changing. EMV chip innovation won’t keep information breaks from happening, yet it will make it much harder for lawbreakers to effectively benefit from what they take. U.S. card backers have quickly moved to this new technology to ensure a decrease in large scale data breaches. Above all else, it implies more noteworthy security against fraudulent purchases.

Will this change affect how I can use my credit or debit card?

EMV cards use an almost identical process when it comes to making purchases with a credit or debit card. However, when making a purchase you will no longer have to “swipe” your card in order to get the machine to read the magnetic strip. You will simply insert your card into the terminal slot and it will begin the process of verifying the transaction. The information will be read from the card chip and sent to the issuing financial institution to verify the card’s legitimacy and to verify the funds in the cardholders account. The major difference to the cardholder is that you must let the card sit in the processing machine until the transaction is complete.

Another exciting aspect of the new EMV embedded chip technology is that it will support contactless credit card reading. You will only have to tap the EMV card against the EMV compliant terminal and the high tech scanner will be able to read the card data information from the embedded computer chip. While this is an attractive technology, it is still quite costly. Most likely you will be scanning your card in a data processor for the foreseeable future.

What About Online Purchases?

The new EMV chip card technology will only change the way you make in-store purchases. There will be no difference in how you use your card when you buy online.

Will The New EMV Card Protect Me From Fraud?

While the new EMV credit/debit card technology is a monumental step in the right direction towards protecting your information, it is still possible for your card to be used fraudulently. Keep in mind that you are still at risk when it comes to exposing your account number on the front of your card. It can still be used to make purchases at stores that are not in EMV technology compliance. The chip also does not protect your data when making online purchases. It is still important to continue to monitor your transaction and to pay close attention to anyone that is handling your card.

How do I Make Purchases if a Business is Not EMV Compliant?

Even though the deadline for EMV compliance has come and gone, there are still many businesses that won’t be in compliance for some time. Many banks knew that this transition would take time. They thoughtfully issued credit cards with both the magnetic strip and the micro processing chip. If a business does not use the latest technology to support EMV, you will still be able to make purchases by swiping the card. Your ability to make purchases will not be impeded.

What Does This Mean For My Business If I am Not in Compliance?

While the change to this new technology can put a financial burden on your business, switching to the new technology as soon as possible can bring you peace of mind. Businessnewsdaily.com reports that “An American Express survey found that small businesses know how real the possibility of a breach is. Sixty-seven percent of U.S. small merchants said preventing and protecting against credit card fraud was very important to running their business, and 52 percent felt they are more vulnerable to fraud than larger companies.*”

If your business is not in compliance it is important to be aware that the responsibility for consumer losses has now be shifted to the party that is least compliant with the new EMV credit card technology. Typically when credit card information is stolen, it is up to the bank to replace the stolen funds. The new rules are such that if a card is stolen and used at a retail store that has not switched the credit card machines to the new terminals, the retail store will now be responsible for the missing funds. Any business not ready by October 2015 is liable for these charges.

Is This Technology Being Pushed Worldwide?

It is shocking to learn that with all the technological advances available in the United States, we are actually behind when it comes to credit and debit card security.

“Chip technology has been widely used in Europe and other parts of the world for several decades in order to combat fraud. In the US, after dipping your card, you’ll sign a receipt — in Europe, you dip and enter a four-digit personal identification number, which is more secure than the dip-and-sign procedure. Banks can choose to issue cards that require a PIN, but it won’t be required in October 2015.”**

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If you have more questions about EMV chip technology and how it works, please contact SecureGlobalPay today!

Resources:
* http://www.businessnewsdaily.com/7859-emv-technology-small-businesses.html#sthash.zR1nNc5w.dpuf
** http://www.businessinsider.com/what-you-should-know-about-emv-cards-2015-9