2019 EMV chip card update

How a small chip is providing big benefits

“Chip cards” were once the newest thing in payments. The ongoing transition from ‘swiping’ to dipping’ ushered in a wave of change to the retail point of sale.

Like any shift of habits, the adjustment posed challenges. Upgrading to chip card technology altered well established point of sale checkout routines. Businesses had concerns, like the cost of equipment upgrades and the speed of EMV certification.

Have chip cards been worth the trouble? The answer is resounding yes: EMV chip cards have significantly reduced in-store counterfeit fraud. In a three-year period ending September 2018, Visa reports an 80% reduction in card-present counterfeit fraud losses for merchants adopting EMV.

This update answers frequently asked questions about the state of EMV chip cards in 2019.

What is EMV?

EMV is a set of global standards that promote secure payment transactions. EMV is best known for chip cards and the secure point of sale terminals that accept them. EMV is an evolving set of standards that allow businesses to safely accept payment from their customers.

Before the creation of EMV each card brand network had its own standards. Overlapping and inconsistent standards made compliance complicated for merchants. EMV’s common standards make accepting debit and credit cards easier for businesses.

Who is responsible for EMV?

Beginning in 1993, card brand networks Europay, Mastercard and Visa—hence EMV—joined together to create the original EMV specifications.

Today, EMV standards are maintained by EMVCo, a private corporation representing six major card brand networks: American Express, Discover, JCB, Mastercard, UnionPay and Visa.

Why is EMV technology so important?

The security features of EMV technology bring in-store credit card processing forward by decades.  Magnetic stripe was the dominant credit card processing technology for many years. Magnetic stripe (or “magstripe”) uses 1970s-era analog technology was no match for modern criminals.

Magnetic stripe technology was static. Everything required for a customer to make a credit card purchase is stored on a magnetic stripe. Eventually fraudsters figured out how to capture that static data and replicate it on counterfeited cards. Verifying that each use of a card was authorized by its owner became difficult—if not impossible.

EMV transactions are dynamic. When the chip on EMV cards connects with an EMV-enabled terminal, a unique, single-use, one-time code is created and encrypted. The dynamic generation of a code and its cryptographic encryption plugged one of the biggest security holes in system of electronic payments.

Is EMV a law? What’s the “liability shift”?

EMV isn’t a law—it’s a voluntary set of standards that help make payments safer. In order to provide positive incentives for everyone involved in the payment ecosystem, the credit card networks changed the ways certain types of fraud are resolved with EMV.

Prior to October 1, 2015, when credit card data was stolen, counterfeited, and used for purchases in the US, the financial institution that issues the card would be responsible for fraudulent purchases. The logic was that the bank was the party most responsible for not safeguarding the data.

Starting on October 1, 2015, that liability for fraud shifted to the party least in compliance. If the customer’s bank supplied an EMV card, but the retailer hadn’t upgraded to an EMV terminal, the retailer would be held responsible for losses.

Do EMV chip cards require special equipment?

Yes, EMV chip card specifications require purpose-built payment acceptance equipment. Chip cards are “dipped” and the slots into which chip cards are dipped need to be certified as compliant with EMV specifications.

There are a wide variety of EMV-compliant credit card terminals, integrated point of sale systems and even peripherals for mobile payment acceptance. No matter what, how or where you sell, there are multiple EMV-compliant hardware options for the way your business works.

EMV-compliant hardware is available with backwards compatibility with magstripe so you can continue to all accept card payments. Most EMV-compliant hardware is also forward looking with NFC technology to accept contactless payments via EMV ship cards as well as smartphone-based mobile wallets.

Has everyone adopted the EMV chip-and-PIN standard?

EMV chip cards have been in widespread use across Europe for many years. Chip cards have proven remarkably successful at combating card-present fraud. According to a study by the UK Card Association, the implementation of EMV in the UK reduced in-store credit card fraud by 75% from 2004 to 2012. EMVCo reports EMV adoption rates in Europe at 85.5% as of 2018, with the percentage of in-store transactions using EMV exceeding 97%.

US adoption of chip card technology has lagged behind the rest of the world. EMVCo reports that as of 2018, 842 million chip cards had been issued in the US for an adoption rate of 60.7%, with 53.52% of transactions being EMV. However, the US is catching up fast: the percentage of EMV transactions was just 18% as recently as 2016.

Have chip cards really made a difference?

A March 2018 Visa report showed at US chip-enabled merchants, counterfeit fraud dropped 80% from September 2015 to September 2018. That’s real progress. The global success in dramatically reducing what was a major source of friction in the market makes the EMV standard shows that the fight against fraud can be won.

Consumer attitudes about chip cards are changing fast as well. An April 2018 survey from Worldpay and Socratic Technologies reported that 82% of credit card users report positive experiences with chip cards, while 74% of users saying they hadn’t experienced any difficulties using chip cards in the past year.

Change is always difficult. In the case of secure chip cards, confusion at the checkout counter, costs for retailers to upgrade terminals, and costs to issue new chip cards all represented headwinds. Yet the benefits EMV delivers suggest that the results justify the efforts.

What does the future of EMV hold?

EMV is not a cure-all for fraud. Fraudsters are organized, determined, skilled, and incentivized to pursue crime. Fraudsters have proven innovative, creative, and persistent. The success of EMV, however, has sent fraudsters scurrying. Fraud has shifted to call centers and online (or “card-not-present”) fraud. Despite this, EMV shows that fraud can be mitigated when a community bands together.

In 2019, EMVCo works with a community of businesses, financial institutions, payment networks, and financial technology companies to make payments safer. EMVCo continues its work on the latest secure payment technologies including specifications for QR codes, 3-D Secure, contactless chip, tokenization, and EMV 2nd Generation. These efforts are critical and yet reflect only a fraction of the work being done across industries to prevent fraud and provide a level playing field for all.

Businesses of every size that accept electronic payments need to make every effort to protect their business and their customers from the impacts of fraud. From preventing counterfeit fraud and unwarranted chargebacks, to protecting businesses from potentially devastating data breaches, keeping your business safe when accepting electronic payment requires planning.

For small businesses that need to keep their focus squarely on their customers, that planning is made easier with the help of an experienced payments partner. Worldpay is a payment technology leader that can help protect your business with secure transactions that minimize fraud and reduce risk. Connect with one of our payments experts today to learn how EMV can help keep your business safe from in-store counterfeit fraud.