EMV chip cards versus magnetic stripe
Why chips and dips are replacing swipes and stripes
Most of us had never given much thought to the black strip on the back of our credit and debit cards.
Then a few years ago, “dipping” started to replace “swiping.” Suddenly, everyone seemed to have an opinion about credit card technology.
Banks, credit card networks, and security experts raved about the safer chip card technology while many consumers and businesses preferred the familiar ease of swiping at the register and were resistant to change.
So which is better, EMV chip cards or traditional magnetic stripe?
Magnetic stripe: a blast from the past
Magnetic stripe stands among the most successful technologies in the history of modern business.
Created in the late 1960s, magnetic stripe is the technology behind public transportation tickets, ID badges, driver’s licenses, and credit and debit cards. IBM named magnetic stripe one of the company’s Icons of Progress alongside innovations that led to the computer, internet, and cell phone.
Magnetic stripe technology is fairly simple by today’s standards. Magnetic stripe stores data in tracks of magnetic strips that are affixed to plastic cards. When you swipe your card at a credit card terminal, hotel room or subway turnstile, the card data is read by a magnetic head. The data on credit and debit cards is formatted on two tracks with the essentials a consumer needs to provide for payment: the primary account number, name, expiration date, and PIN code.
Magnetic stripe was the king of electronic payments for four decades. Banks and credit card companies began widespread adoption of the technology in the 1980s. Though it’s slowly being replaced in the U.S. and is even closer to retirement worldwide, consumers still swipe their cards billions of times each year.
Magnetic stripe meets its match in modern fraud
The static data storage of magnetic stripe would prove its undoing. Magnetic stripe gained popularity when it became easy and inexpensive to replicate cards. They were easy to read with simple, inexpensive, low-tech equipment.
Easy access to personal credit card data proved to be a real weakness of magnetic stripe. As with many technologies, criminals eventually caught up. “Skimmers” could replicate a magnetic stripe card reader. Though the personal card data was invisible to the naked eye, stealing that data is fairly trivial to a properly equipped fraudster.
The results of this flaw are all too familiar, with news headlines detailing the devastating costs of fraud. Once the data was stolen from a magnetic stripe card, it could be replicated on counterfeit cards and used to fraudulently purchase merchandise. Criminals did so to the tune of billions of dollars. Fraudsters had found a leak to exploit, so the technology of the 60s needed an update.
Chip cards: the future is now
Chip cards plug the security holes left by magnetic stripe. Chip cards replace static, unprotected data with dynamic cryptographic data. Chip cards are so named for the microcircuit built in to every card, with matching technology on the reader. Chip card technology makes it nearly impossible to counterfeit cards, saving consumers and businesses billions in losses from fraud.
Chip cards are a 21st century response to serve a new world of digital commerce and fight fraud with modern security tools. The technology behind magnetic stripe was born in the 1960s, and its framework was sealed early on. The technology behind chip cards was born in the 1990s at the dawn of the commercial internet. Chip card technology, or EMV, continues to evolve even today.
EMV stands for Europay, Mastercard and Visa, who joined together in the early 1990s to create common standards to make card payments safer for everyone. Before EMV each card network had their own standards, which was difficult for businesses who wanted to accept credit cards. Creating common standards makes it easier to stay safe. EMV standards help everyone—consumers, banks, card networks, payment processors, and of course businesses of every size and type that accept electronic payment.
Today, EMV chip card standards are maintained by a private organization, EMVCo, which is managed by leading card networks including American Express, Discover, JCB, Mastercard, UnionPay, and Visa.
EMVCo continues to develop and maintain standards that will keep modern commerce safe into the future. From contact and contactless EMV to tokenization, from QR codes to 3-D secure, the technology that began with chip cards is leading efforts to secure modern commerce wherever it takes place.
Making chip card technology work for your business
Chip card technology is proving effective in fighting fraud and is increasingly accepted by consumers.
In 2018 Visa reported that businesses who implemented chip card technology saw a remarkable 76 percent drop in losses related to fraud between December 2015 and December 2017. That represents billions of dollars in savings, not to mention saving millions of hours of aggravation.
Changing years of habits from “swiping” to “dipping” wasn’t always easy for consumers or the businesses that served them. Like most new things, eventually everyone adjusted. An April 2018 survey by Worldpay and Socratic Technologies showed that 82 percent of credit card users report positive chip card experiences.
Whether you’re just starting your business journey or are already far along, if you want to get paid, you’ll need to accept credit and debit cards. If you want to keep more of what you earn, you’ll need the most current technology to do so safely. You’ll also want expertise to guide you along so you can leave payment security to others to focus on what you do best.
Worldpay is a global payments leader that understands the importance of keeping businesses like yours safe. Worldpay understands chip card technology, too, and can put it to work to help safeguard what you’ve built. Connect with one of our payments experts today to learn how.