The Impact of EMV Technology on Payment Transactions

EMV cards have quickly become an integral part of keeping businesses and their customers secure. The chip cards work to protect businesses by decreasing losses related to credit card fraud and creating a safer payments ecosystem.

The History of EMV

Europay, Mastercard, and Visa were the founding members of this standard, creating the name EMV in 1993. Later joined by Discover, JCB, UnionPay and American Express to form EMVCo.

The first version of EMV came out in 1994, although it took a few years before it saw widespread use across Europe. Issuers in Europe adopted this standard because phone line card authorization was prohibitively expensive for them. Due to international call rates, the cost to authenticate cards was 80 to 90 percent higher in Europe.

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It took until 2015 for the United States to start its EMV migration. Companies were slow to adopt the more secure payment system because of the expense and lack of synchronization among retailers, credit card providers, and banks.

On October 1, 2015, a liability shift was created, which required businesses to be able to accept EMV cards or risk being liable for fraudulent activity if it were to occur, pushing for synchronization across the board.

EMV cards have now become the standard, as they are more secure and smarter transactions than a magnetic stripe or cash transaction.

How EMV Chip Technology Works

EMV chip cards are more secure because they contain a microchip, which can generate a code for each transaction. This code is unique and cannot be used again, so even if the cardholder’s information is stolen (e.g., if the card is copied or the credit card number falls into the wrong hands), fraudsters wouldn’t be able to go through with a transaction.

In contrast, transactions involving magnetic stripe cards are less secure because magstripe cards are only able to store static information. This makes it easy to produce counterfeit cards.

Newer EMV cards can also be used for contactless payments. Customers can simply tap or wave the card across an EMV-enabled terminal, and the card would generate a one-time code for the transaction.

From the customer’s side, using a card with EMV chip technology is quite simple. They present the card at the point of sale (POS), but instead of swiping it, the shopper dips or taps their card using the merchant’s card reader. Once the transaction is authorized, they can proceed with the sale.

EMV Cards Are Safer

Previous methods using magnetic-stripe cards meant that cashiers had to look at the card and signature to verify a purchase. Information on these cards store data statistically, meaning that it can be pulled from the stripe with a simple piece of hardware.

The chip in the EMV cards provides stronger security for transactions through cryptographic algorithms, uniquely encrypting the data each time you use it. Authenticating your purchases are made easier with the use of a personal PIN number, instead of requiring a signature.

EMV cards provide a two-fold confirmation during card-present transactions, using the physical card and the customer’s PIN. This verifies the cardholder, allowing the one-time-password (OTP) generated by the chip to be confirmed and approved. In situations of card-not-present purchases these options are unavailable as the card won’t be in the merchant’s hands, making it easier to exploit than retail fraud. Some methods and tools for eCommerce sites to implement verification are to:

  • Continue PCI compliance and follow the specific rules for data security and management.
  • Verify card security codes.
  • Use an address verification service (AVS).
  • Analyze priority shipping requests (especially if free shipping is offered).
  • Validate unusual orders from repeat and regular customers.
  • Confirm the phone number and transaction information before shipping products.
  • Take advantage of fraud prevention services available from credit card companies such as Verified by Visa or Mastercard SecureCode

Keeping a well-maintained authentication system will significantly reduce your business’ risk, while your customers enjoy the ease of purchasing your products with a business that establishes trust and security with CNP payments.

EMV Cards Are Smart

Each one of the chips on an EMV card contains an embedded microprocessor, a type of small computer that provides strong security features and other capabilities not possible with traditional magnetic stripe cards.

When you insert this card into a terminal, the reader is able to exchange data with the card easier. Contactless EMV cards allow for an exchange of data via radio frequency without the card ever leaving the customer’s hand.

Research shows that contactless transactions are approximately 53% faster than a traditional magnetic stripe credit card transaction, and 63% faster than using cash.

How to Implement EMV Chip Technology in Your Business

The first step to implementing EMV chip technology is to ensure that you have the right equipment. Your credit card readers must be EMV enabled in order to support chip-and-pin and chip-and-signature transactions.

The good news is that most credit card terminals these days can support EMV, so if you recently purchased your credit card machines, they’re likely EMV-compliant.

If this isn’t the case, contact your payment processor or hardware provider to discuss your options.

If you already have EMV-compliant technology, you should be good to go from the technical side of things. You may need to orient your staff on how to use the terminals if they’re unfamiliar with the technology.

In some cases, you may also need to guide your customers on how to use their EMV payment cards.

Final Words

As more transactions become digitized, it is important that businesses and their customers are educated on how they are transferring money and the tech behind these products that protect their payments.

Find out how Stax can help you join the next generation of digital payments. Contact us today.