Chip Cards are Paving the Way to a More Secure Payment System
How does a single chip change transactions?
On the ever-winding road to building better card security protection and stopping credit card fraud, EMV chips represent the newest technology that every merchant needs to consider. EMV stands for Europay, Mastercard, Visa, the triad of credit companies that pioneered the use of chips in order to create security within their own cards and stave off the growing costs of fraud on the system. A number of other card companies, including Discover and American Express, have picked up on the practicality of chip cards and now issue them to customers across the globe. While EMV has been prevalent elsewhere in the world for several years, it is just taking root in the U.S. What makes chip cards such a major upgrade over the secure payment system status quo?
What's in a Name
Chip cards got their name because each contains a micro-sized computer chip that contains information on the account and cardholder. While the magnetic strip of a card was previously the only way any business could interact with a credit card, the information encoded in the magnetic strip couldn't be as secured with encoding or scrambling. This meant that hackers or identity thieves could easily tap into a system's credit card number routing system and steal actual card data and numbers. The first and strongest line of defense in chip cards is an encoding feature. Each exchange with a chip card creates a unique identification number for both the cardholder and business. A hacker who gets this number won't be able to steal money or personal information, since the same number will never work twice. Nor can this transaction number give a hacker any information about the card itself. This makes chip cards part of a vastly improved secure payment system compared to magnetic strips alone. It makes it difficult, if not impossible, to forge cards in the first place or to present them at EMV-enabled devices successfully.
Changes To Security
Prior to the innovation of chip cards, issuing banks and credit card companies often took responsibility for fraudulent purchases. A stolen Visa card that racked up $1000 worth of spending, for instance, would not result in the cardholder being charged. Companies that do not accept EMV payment systems, however, put the onus of security fraud on their own shoulders, since issuers and credit card companies will no longer cover the cost of POS fraud that could have been thwarted by EMV acceptance. Now, based on the specific dynamics of a POS transaction, the merchant may become liable for fraudulent transactions.