EMV CHIP CARDS: Are You A Dipper?
Are you a swiper or a dipper? Chances are, you have at least one EMV chip card in your wallet. This is what EMV chip cards are and what you need to know about them.
EMV (Europay, Mastercard, and Visa) has been used worldwide for years and was introduced in the U.S. about 18 months ago. The cards are also called smart cards, chip cards, smart-chip cards, and chip-enabled smart cards.
Here’s what you need to know about the new generation of cards.
Increased protection against fraud
The number one reason the U.S. is switching to chip cards is to curb rampant credit card fraud. Things have gotten bad – before the switch, the U.S. was home to nearly half of the world’s credit card fraud!
Experts pin the high fraud rate on the outdated system the U.S. had been using. The magnetic strips on your old credit and debit cards store static, unchanging data. That means anyone who gets their hands on that data can do whatever they want, like racking up huge bills, emptying accounts, and taking out loans in your name.
In contrast, EMV cards create a unique transaction code for each purchase you make. No one can use that code again, so even if a fraudster steals the chip information from the point of sale, they won’t be able to use that transaction number for another purchase. The data transmitted during each transaction is also encrypted, adding more to the security measures it offers.
EMV technology will not prevent data breaches from occurring, but it will make it much harder for criminals to profit from what they steal. Experts are hopeful this shift will significantly reduce credit card fraud in the U.S., and studies show that U.S. counterfeit fraud rates have already decreased. According to Visa, chip-enabled merchants saw a 52% drop in counterfeit fraud from 2015 to 2016.
How it works
Like their counterparts, chip cards are processed through the two steps of card reading and verification. However, there’s no quick swipe involved. Instead, you insert or dip your card into a terminal slot and leave it there while waiting for the transaction to process.
When your card is dipped, data is transmitted from the card chip and the issuing financial institution to verify the card’s legitimacy and create a unique transaction code. This process will take a bit longer than a swipe.
Aside from dipping, EMV cards can also support contactless card reading, known as near-field communication or NFC. You tap an NFC-equipped card against a terminal scanner, which reads the data from the card’s embedded computer chip.
Contactless transactions are faster and more consumer-friendly than dipping; you only need to tap! Unfortunately, the necessary equipment to scan them is expensive, so this option is not yet widely available.
After you’ve inserted your card into the payment terminal, the card acts just like your ordinary magnetic stripe card. You will need a PIN or a signature that is transmitted to the payment terminal for verification and approval. If your merchant does not have a chip-card reader, they can also read the EMV card with an ordinary swipe.
You may find yourself at a point-of-sale terminal, unsure whether to dip or swipe. No worries – the terminal will guide you. If you enter a card into an inactive chip-reader slot, it’ll prompt you to swipe it. Likewise, if you try swiping instead of inserting into an activated chip reader, you’ll be prompted to dip your card.
Fraud liability changes
The shift to EMV chip cards presents several changes for merchants and financial institutions. Issuing new cards and purchasing new processing technology is an expensive undertaking.
But there’s more than just the cost involved. The switch to EMV represents new liability rules. Though fraud is harder to pull off with chip cards, it’s still possible. If an EMV card is frauded, who is held responsible?
The rule with transactions conducted using counterfeit or stolen magnetic-strip cards is pretty straightforward: consumer losses fall back on the payment processor or issuing financial institution, depending on the card’s terms and conditions.
Card chip fraud works somewhat differently. Since the Oct. 1, 2015 deadline created by the four major U.S. credit card companies, card fraud liability has shifted to whichever party is the least EMV-compliant in the transaction. This change means they will be held responsible if the merchants do not have chip-card reading equipment. If the consumer’s financial institution has not provided them with an EMV card, they’re footing the bill.
So, while replacing payment processors and issuing new cards is an initially expensive venture, it will save businesses and financial institutions the massive cost of being held responsible for fraud payouts in the long run.
Increase in online fraud
The EMV transition is not all good news on the fraud front. Though it helped cut in-store fraud in 2016, it also gave consumers a false sense of security, spiking online fraud. A chip card or magnetic strip for an online purchase makes no difference. When buying something online, it’s up to you to be extra vigilant and ensure you aren’t scammed.
Fortunately, protecting yourself against online fraud is easy. First, always shop with a reputable retailer and read reviews before sharing your card information. Never give personal information over email, or authorize a wireless money transfer for a website or merchant if you are unfamiliar with them. Consider using tokenized systems like ApplePay, where your personal information is transformed into a numerical token instead of an actual card number.
