The EMV Chip Backstory: What’s It All About?

Partner content provided by Bank of America Merchant Services

The excerpt below is from a recent white paper published by Bank of America Merchant Services titled, “How to Prepare for EMV.” To learn more about EMV, view and download the full report, or contact a Bank of America Merchant Services business consultant.

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EMV is a new specification that defines a set of requirements to ensure credit and debit cards can be securely accepted on a common standard worldwide. For this paper, we are focused on those new specifications for compliant cards that have a computer chip embedded in them rather than the more traditional magnetic stripe. This security standard is currently used by credit card issuers and merchants in most countries except the United States.

In most parts of the world, the retailer is able to take advantage of the security chip by having the cardholder “dip” their card into a card reader, where the card can be authenticated. And when used with PIN codes, EMV-compliant cards provide retailers and banks greater confidence that a card’s user is its true owner by combining something the card’s real owner would have and something only they would know. Because EMV is not universally deployed, however, even chip cards continue to have magnetic stripes that are used to authenticate the card at a traditional point-of-sale (POS) device. To fully take advantage of all the new chip technology has to offer, U.S. retailers will need to invest in chip readers for each device.

EMV originated as a collaboration among Europay (later purchased by MasterCard), MasterCard and Visa and was implemented in Europe in the 1990s. By some estimates, almost half of all payment cards issued outside the United States have an EMV chip. Although the chip virtually ensures that the card has not been counterfeited, issuers can further customize EMV cards by, for example, requiring cardholders to enter a PIN for each purchase instead of the current standard of signing a receipt.

Given some recent large-scale data security issues, there has been a renewed push for EMV adoption in the United States. Because most other major international markets have adopted EMV, criminal rings have taken to using stolen card numbers predominantly in the United States. This so-called “fraud migration” costs banks and merchants. As a result, the major payment networks have decided that the United States needs to be quickly brought up to the global security standards to ensure the integrity of international commerce.

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