EMV Basics for FIs

EMV and Your Financial Institution — a Q&A

You’ve probably been hearing about EMV, or the transition to payment cards embedded with electronic chips, for a long time. In October 2015, the rollout of EMV in the US reaches a major milestone. This is when liability for fraudulent payments will shift to merchants who are unable to process EMV transactions when a chip card is presented for payment. This liability shift could have a major impact on businesses (both large and small) that are unprepared.

EMV, for financial institutions, is one of the biggest changes to happen in the payments world in a long time. Financial Institutions need to be concerned with upgrading ATMs to read chip cards, reissuing large portfolios of existing payment cards, and supporting small businesses that lean on them for merchant services. As you consider all of the issues that accompany the introduction of chip cards in the US, use our Chip Card 101 as a handy reference for commonly asked questions about EMV.

What is EMV?

EMV, also known as chip cards, is a series of specifications that define a more secure method of payment. It was developed jointly by Europay, MasterCard, and Visa in the mid-1990s.

How does it work?

EMV introduces a small computer or "chip" to every payments device. This chip stores information, performs processing, and contains secure keys that generate cryptographic data. Dynamic data is generated with each transaction, making it nearly impossible to create counterfeit cards or replay intercepted transactions.

What are the benefits of chip cards?

Chip cards are designed to protect against counterfeit fraud through authentication of dynamic data generated by chip cards, smart phones, and other EMV-compliant devices. They also provide risk management parameters at the card level and when used with PIN, can offer protection against lost and stolen card fraud.

Will chip cards work in ATMs?

ATM owners will need to upgrade their ATM fleet to be able to process EMV transactions. This will help avoid liability for transactions conducted by international Maestro cardholders (April 2013 and later) and for transactions conducted by US cardholders (October 2015 and later).

How can we prepare our ATMs for chip cards?

Work with your ATM service provider and perform survey of your current fleet. Upgrades may require both a hardware upgrade and a software update.

What are some options for reissuing cards with chips?

Amidst the adoption of EMV, financial institutions should consider three different card reissuance strategies:

  • Mass Reissue – reissue all cards across your portfolio at the same time; this can create a significant operational impact on your business

  • Natural Reissue – reissue chip cards as older cards expire or are replaced; this might have a lower impact on your operations but will take more time to get cards into market (all cards might not be reissued by the October 2015 liability shift date)

  • Hybrid Reissue – reissue chip cards to select groups of high-impact customers before the liability shift, then slowly roll out the remainder of your portfolio as cards reach their natural reissuance dates

Can I use the same card number and expiration date when issuing new chip cards?

No. The card number can stay the same but the expiration date will need to be different.

Do my CVV/CVC and PVK keys change when I issue EMV cards?

No. The CVC/CVV and PVK that are currently used for the magnetic stripe card can be used when issuing EMV cards.

What size of chip will be utilized for the card production of my chip plastic?

The chip size for all plastics will be M3. The M4 chip will be used in the future when contactless EMV is deployed.

We have small businesses that rely on us for merchant services. What do they need to know?

As of October 1, 2015, if a customer presents a chip card for payment and your merchant is unable to process that transaction using EMV, your client may be liable for any fraud that occurs. Because chip cards require dynamic authentication, an EMV capable terminal is required with a special reader designed for chip cards.