You may have noticed increasing excitement and news about EMV or chip cards. So have we! We’re here to satisfy your curiosity. Read on to get the scoop on how chip cards work, why they matter, and what the transition might look like for you.
What does EMV even mean?
Fun fact: EMV isn’t a specific type of debit or credit card; it’s a standard. EMV stands for Europay, MasterCard, and Visa. In the 90s, these three organizations realized there was a need for more secure payment technology—and that it had to be global. So, they got together and wrote the first version of the EMV standard, which was published in 1996. Since then, Discover, American Express, JCB, and UnionPay have all joined the original founders (creating EMVco*). Together, this group maintains and improves the EMV standard.
Cards that adhere to the EMV standard have a chip that stores the card information. When you use your card, software on the chip can interact with the merchant’s card reader to create a unique authorization code for each purchase.
Why do chip cards matter?
Chip cards are virtually impossible to duplicate. Therefore, they can prevent one of the most prevalent types of fraud: counterfeit-card fraud. This type of fraud occurs when card information is stolen, either by skimming (swiping the card through a device designed to illegally capture it) or hacking, and then used to create counterfeit cards.
But do they really work?
Chip cards are undoubtedly effective: Europe has seen a 70% reduction in counterfeit card fraud with the introduction of EMV technology.1
Chip cards increase card security—but they aren’t a silver bullet. They’re designed to prevent fraud that occurs with a duplicate card. Card networks are still exploring technologies designed to prevent other types of fraud.
When is this going down?
The switch to chip cards is already underway. It’s a mind-blowingly huge task—there are about 1.2 billion cards to replace, and merchants will have to update about 12 million card readers.2 This is part of the reason why the U.S. has been, arguably, slow to adopt this technology.
Some banks are already sending out chip cards, either in batches or as cards expire. Other banks are on the verge of rolling them out to customers. According to a recent study by the debit network PULSE, an estimated 25% of the debit cards in the U.S. will have chips by the end of 2015. Since it takes a lot of time to manufacture and mail new cards, the remaining 75% may take months or even years. PULSE estimates that 96% of debit cards will have chips by the end of 2017.3 As each new card is issued and each card reader is updated, the entire payment network becomes more secure.
What changes will you see?
Right now, customer liability for fraud is limited by Federal law (and most major card networks like Visa and MasterCard offer additional protection). EMV technology won’t change that protection.
Most U.S. card issuers have chosen to offer chip-and-signature cards (rather than chip-and-PIN). This means you’ll still be able to sign for purchases at restaurants and other merchants that don’t offer PIN-based transactions.
Therefore, the changes you’ll see will be subtle. In fact, the big changes with EMV are the ones you won’t see—since your card information will be more secure, it’s less likely that you’ll see unauthorized charges or that your card will need to be replaced before it expires.
How do you use a chip card?
When you receive a chip card, you’ll use it just like you used your old card. U.S. banks and card issuers are making cards that have a magnetic stripe in addition to the chip. Since over half the merchant card readers haven’t been updated yet, you’ll be swiping your card for a while longer.
When you run into an EMV-enabled card reader, it’ll be smart enough to tell you what to do. If your card has a chip in it, it’ll ask you to insert the card and leave it there while the transaction is processed (rather than swipe it). Chip card transactions take a little bit longer than magnetic stripe card transactions—about 6 seconds—so you’ll have a moment to ponder the fraud-fighting technology you’re carrying in your pocket.
When will Simple offer chip cards?
We’ve been working hard to implement them. We’re almost there, and we’re looking forward to sending them out soon! If you’d like to dive deep into chip card trivia, check out our support article.