EMV 101

The Security of Europay, MasterCard and Visa Credit Card Systems

EMV 101
May 1, 2015

EMV may sound like DMV, but is not another government facility you hate to visit. It stands for Europay, MasterCard, and Visa, and it refers to standards that these three companies developed for smartcards – cards with technology beyond the traditional magnetic stripe.

EMV-compliant cards have a computer chip embedded directly into the card. This chip takes the place of the magnetic strip that contains your payment information.

Magnetic strips contain the same account data that is transferred each time a swipe takes place and are easy to counterfeit. Chips, on the other hand, generate unique information for each transaction. That information is useless to thieves since they cannot use it for other transactions. Further, EMV cards are not easy (or cost-effective) to counterfeit.

EMV cards require different readers to enable merchants to process payments – either by inserting the card into a slot in a terminal so that the chip information can be read, or by tapping a reader that scans the information through contactless transmission known as near-field communications (NFC) which is employed by Apple Pay.

Verification of the card is done at point of sale through either a signature or entry of a PIN (Personal Identification Number), depending on your card issuer’s preference. Chip-and-PIN is generally more secure than chip and signature.

While they represent improvement, EMV cards alone cannot stop fraud. The method of credit card fraud will always change over time, based on the easiest method available. Consider the following scenarios:

Online Fraud – EMV technology reduces fraud at point of sale but has no effect on e-commerce, where the physical card is never used. If a thief possesses enough of your information to order online, it does not matter what type of card you have. You must still be vigilant about your card number, expiration date, and PIN or authorization code.

Card Theft – Thieves may not be able to counterfeit your card, but they can still use your EMV card should they manage to steal it. With chip-and-signature cards, your only defense is the clerk asking for identification. Many clerks do not bother with ID, and signature verification is sketchy at best. Chip-and-PIN cards are no better if your PIN is also stolen.

Transmission and Storage Breaches – EMV would not address large breaches such as Target and Home Depot, because these breaches exploited flaws in handling of the data. The flaws are either in transmission to the processor (where the payment data is encrypted) or in storage at the merchant anywhere that account numbers are in unprotected form.

Most of the rest of the industrial world has adopted EMV technology. Adoption in the U.S., however, has been slowed by concerns about the costs of implementation (especially in upgrading readers) and complaints that EMV does not address the majority of the security issues.

Even so, you can find EMV cards at several American banks, including American Express, Chase, Citi, and Wells Fargo. Sam’s/Wal-Mart also offers EMV cards, and other large-scale vendors are likely to follow. You will have to check individual issuers and cards to determine which cards are chip-and-signature versus chip-and-PIN.

The supply of U.S. EMV cards is certain to increase. Merchants and card issuers have a deadline to switch to EMV systems by October 2015 (with a two-year extension for gas pump readers) or face potential liability for fraudulent charges whenever a card is used at point of sale. The least EMV-compliant transaction party will hold the short straw for liability.

In short, enjoy the increased security of your EMV card while it lasts. Tokenization systems such as Apple Pay are eventually likely to overtake EMV systems, but that will be a long process – and hackers could find the weak points in that system as well.

The main conclusion: take common sense security measures with whatever technology you use and always check your account regularly for fraudulent activity.

If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.

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