EMV Basics for Merchants

Chip-card 101: An intro to EMV for merchants
EMV is one of the biggest changes to happen in the payments world in a long time. As you consider how your business will handle the introduction of chip cards, use our Chip Card 101 as a handy reference for commonly asked questions about EMV.

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 reached a major milestone. This is when liability for fraudulent payments shifted to non-EMV merchants who are unable to process 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 is one of the biggest changes to happen in the payments world in a long time. As you consider how your business will handle the introduction of chip cards, use our Chip Card 101 as a handy reference for commonly asked questions about 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. 

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.

How does this affect my business?

As of October 1, 2015, if a customer presents a chip card for payment to a non-EMV merchant and is unable to process that transaction using EMV, that merchant 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.

What changes during checkout with an EMV terminal?

At the point of sale, there are two main changes:

  • Instead of swiping the card, the customer will insert the card into the reader

  • The card will remain in the reader for the duration of the transaction

So there’s no more swiping?

Instead of a quick swipe, chip cards will remain in the EMV reader for the entire length of the transaction. Customers who are unfamiliar with the new process may insert the card and then immediately try to remove it from the reader. Or they may forget that their card is in the reader and leave it behind. Be prepared for a potential jump in the number of cards left behind by customers.

How can I reduce the number of cards forgotten in the terminal?

Consider techniques such as not printing the cardholder’s receipt until after the card has been removed from the card reader. Another option is to program the terminal to produce an audible beep when the card should be removed. Training your employees on this new process is perhaps the most critical element for reducing the number of forgotten cards.

Will customers with magnetic stripe cards be able to use EMV terminals?

Yes, EMV terminals also have a magnetic stripe card reader. For now, credit and debit cards will be issued with a chip on the front of the card and the familiar magnetic stripe on the back of the card so that chip cards can be backwards compatible with non-EMV capable devices.

Will the magnetic stripe reader eventually be removed from EMV terminals?

For the foreseeable future, magnetic stripe readers will continue to be a feature on EMV terminals. This will allow EMV terminals to process transactions from the large base of magnetic stripe cards in the market and support fallback (terminal can’t read the chip) transactions.

Do EMV transactions take longer to authorize than magnetic stripe transactions?

EMV transaction times are dependent on how the issuer personalized the card and how your business configured your terminal. If the card and terminal are properly “tuned”, the transaction time should be close to what you experience today.

Does EMV require a PIN be entered on credit as well as debit transactions?

There is no PIN requirement with the US implementation of the chip on credit transactions. The issuer will determine if a PIN is required.

How does EMV affect the price I pay for accepting card payments?

Interchange, which represents the biggest bulk of fees you pay for accepting card payments, is not affected by EMV.

Does the adoption of EMV eliminate the need for end-to-end encryption or tokenization?

No. EMV does not encrypt all of the transaction data (including the personal account number), so end-to-end encryption and tokenization are still valuable tools in securing payment data.

Does EMV apply to online payments as well?

Online payments are currently not in the scope of EMV because there is no card-terminal interaction, so no cryptogram is created. However, the industry is exploring options for using EMV features in online payment environments. Customers will be able to use their chip cards for online payments as they do now.

How do chip cards work with tablet-based POS systems?

To make chip cards work on tablet-based POS systems, a wired or wireless PIN pad (WPP) that can read chip cards is required. Additionally, NFC (Near Field Communication) for wireless will need to be activated on the tablet. 

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Patty Walters is the senior vice president of Merchant Products and Security at Vantiv—a role that gives her responsibility for all EMV strategy for the Vantiv Merchant business.
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