What Types of EMV Chip Cards Are There?
EMV chip cards come in two main varieties: chip and PIN cards and chip and signature cards.
Chip and PIN Cards:
- Consumers using chip and PIN cards must enter their Personal Identification Number (PIN) to authorize a transaction. This adds a crucial layer of security, ensuring that only the rightful cardholder can complete the purchase. If the entered PIN matches the one associated with the card, the transaction is approved. Otherwise, it is declined. Chip and PIN cards are prevalent in regions like Europe and many parts of the world where PIN authentication is standard.
Chip and Signature Cards:
- With chip and signature cards, consumers authorize transactions by signing a receipt. The signature is then compared with the one on the back of the card or stored in the issuer's system. If the signatures match, the transaction is approved. This method is more common in the United States, although its usage is declining in favor of more secure methods like chip and PIN.
Advantages of EMV Technology
Enhanced Security:
- EMV technology is designed to reduce credit card fraud, especially counterfeit card fraud. The chip in an EMV card generates a unique transaction code for each use, making it nearly impossible for fraudsters to duplicate the card’s information for fraudulent purposes.
Security Levels:
- The security level varies between PIN and signature authentication. Generally, PIN transactions are more secure because they rely on a secret code known only to the cardholder, whereas signatures can be forged more easily.
Adoption in the United States:
- In the U.S., most credit cards are chip and signature, while debit cards are predominantly chip and PIN. Despite this, both types can sometimes be used interchangeably, with debit cards often having the option to bypass PIN entry and be processed as credit transactions.
Future Trends:
- Credit card companies are exploring new forms of authentication due to the limitations of both PIN and signatures. Emerging technologies like chip and biometric cards, which use fingerprint or facial recognition, promise even higher levels of security.
Costs and Processing Considerations
Cost to Accept EMV Cards:
- The cost to accept EMV chip cards is generally the same as for magnetic stripe cards. However, processing costs can differ between chip and PIN cards and chip and signature cards. Typically, PIN debit processing is less expensive than credit card processing.
Running EMV Debit Cards as Credit:
- Many chip debit cards allow transactions to be processed as credit, where the cardholder signs instead of entering a PIN. These transactions are subject to different rates as per Visa and Mastercard's interchange tables, which can sometimes make PIN debit cheaper for merchants.
Implementing EMV Technology
Equipment Requirements:
- Merchants need EMV-capable equipment to process chip card transactions. Most new card readers come with built-in chip readers, so upgrading equipment should be straightforward. Additionally, having a PIN pad can facilitate PIN debit transactions, offering potential cost savings.
EMV and NFC Technologies:
- EMV (Europay, Mastercard, and Visa) technology secures card-present transactions through chip cards, aimed at reducing fraud from counterfeit and stolen cards.
- NFC (Near Field Communication) enables short-range wireless communication for contactless transactions. Devices like smartphones and contactless cards use NFC to complete payments by tapping near a compatible terminal. NFC is used in mobile payment systems (e.g., Apple Pay, Google Pay) and transit fare systems.
EMV and Card-Not-Present Transactions
Impact on CNP Transactions:
While EMV primarily secures card-present transactions, its adoption has indirectly affected card-not-present (CNP) transactions. The implementation of EMV led to a liability shift for fraud in card-present transactions to merchants who do not support EMV. Tokenization, dynamic authentication, and other security measures have become more common to protect CNP transactions.
Known Issues with EMV Chip Cards
Transaction Speed:
- Initially, consumers reported slower transaction speeds with EMV chips compared to magstripe cards. This issue has largely been resolved with improved technology.
Terminal Issues:
- Some merchants experience problems with chip card terminals, such as not prompting for PIN entry or not offering cashback options. These issues can often be resolved by contacting the merchant services provider for troubleshooting.
Card Cloning:
- Despite EMV's advanced security, card cloning remains a concern. Fraudsters use skimmers to capture card data, which is then transferred to counterfeit cards. Protecting against such fraud involves using EMV and additional measures like monitoring for unauthorized transactions.
In summary, understanding the types of EMV chip cards, their benefits, and implementation considerations helps businesses and consumers navigate the evolving landscape of secure payments. Emerging technologies and best practices continue to enhance the security and convenience of card transactions.