The adoption of EMV® chip technology is growing rapidly around the world. The number of chip cards in circulation increased by 1 billion in 2014 representing growth of 43%; a number that was boosted by UnionPay’s engagement in EMVCo in the same year. With EMV migration in the US in full swing, there is little chance of it staying out of the headlines. But what is EMV chip technology and why is it proving to be such a success?
What is EMV?
EMV is designed to ensure the security of chip-based payment cards. It is a set of specifications for smart card payments and acceptance devices used to authenticate payment (credit, debit, prepaid, store, etc.) card transactions. The standards cover integrated circuit (IC) cards, IC card capable point of sale (POS) terminals and automated teller machines (ATMs), and are defined and managed by EMVCo. EMVCo is jointly owned by American Express, Discover, JCB, MasterCard, UnionPay and Visa, and facilitates the worldwide acceptance of secure payment transactions by managing and evolving the EMV specifications and related testing processes.
Dipping or Tapping – How EMV Payments Work
EMV technology can be used to make both contact and contactless transactions. With a contact transaction, the card is physically inserted, or ‘dipped’, into the card reader. This allows the chip in the card to connect with the reader and exchange information with the terminal. Contactless transactions work differently. With these transactions, the card reader energizes the chip and exchanges information over the air using radio frequency connectivity. This means that the card does not have to come into contact with the terminal for the transaction to be authorized.
Is EMV Chip Technology Secure?
Yes! EMV technology is very secure. This is because, unlike magnetic stripe cards, the cryptographic keys within the chip cannot be easily obtained, which makes hacking and counterfeiting EMV cards too expensive. Also, each transaction generates a unique identifier. This means that even if a transaction is compromised, the details obtained cannot then be used for fraudulent activity. In addition, the majority of implementations of EMV cards and terminals incorporate extra authentication protocols, such as a personal identification number (PIN). These layers of security dramatically decrease the levels of credit and debit card fraud. This reduction in fraud was a key factor behind US EMV migration.
It’s not Just the Security…
Aside from security, EMV technology offers many other practical benefits. For example, EMV contactless transactions are so fast, they are estimated to have saved UK consumers up to a century at the checkout. Also, consumers with EMV chip payment cards can use their card on any EMV-compatible payment terminal across the world. In addition, not only can EMV cards be used worldwide, they can also be can be used online, in the form of secure card not present (CNP) eCommerce transactions.
EMV and Mobile Payments
Virtually all near field communication (NFC) mobile payments, whether they be secure element (SE) based, or cloud-based using host card emulation (HCE) technology, are EMV implementations. Put simply, mobile payments are contactless EMV transactions that run on the same payment rails as any other EMV transaction.