In 2016, the United States finally began the transition from magnetic strip credit and debit cards to EMV chip cards. Short for Europay, Mastercard, and Visa, the companies that develop and administer this technology, EMV chips have been used in Europe for over a decade and have greatly improved bank security on the other side of the pond. The United States is one of the last countries to accept this technology.
In the wake of several large-scale data breaches and increasing credit card fraud, U.S. card issuers have finally adopted this technology to keep their cardholders’ information safe, and the shift is also expected to reduce the costs associated with fraud. Here is a look at seven ways these new cards help to keep bank information secure:
1. Designed to Prevent Fraud
EMV chips are specifically designed to prevent fraud. Developed in the 1960s, strips were designed to make transactions easier. EMV chips took the technology a step further and shifted the focus to security and fraud prevention. In the ten plus years that other countries have been using this technology, they have had positive reports of reduced in-person credit card fraud.
Arguably, the United States stuck with magnetic strips for so long because of a sophisticated internet service that allows instant communication in real time. However, the banking and finance industry ultimately realized that the convenience of magnetic strips was not worth the high rates of fraud.
2. Unique Transaction Codes
Every time a chip card is used, it creates a brand new, specific transaction code that cannot be used again. In contrast, with traditional magnetic strip cards, it’s easy to clone the info from the strip, and once a scammer has those details, they can use them repeatedly. With EMV cards, it’s no longer profitable for hackers to try and get this information because even if they did, they would not be able to use it. Thanks to the unique transaction codes, the credit card would just be denied.
3. Nearly Tamper Proof
It is very difficult to tamper with a chip card. Scammers can make skimmers for less than $20, and if a consumer runs their card through an ATM or a gas pump with a skimmer, the scammer can instantly capture their credit card details. EMV-chip cards actually use small computer chips that are incredibly hard to counterfeit. To get that type of information from a chip card, scammers need equipment that costs nearly a million dollars. To put it simply, that kind of upfront investment isn’t something most scammers are able to manage.
4. Encryption Technology
When you used an old magnetic strip credit card, the payment information was broadcast to the bank as it was. However, when you use a chip card, it uses encryption to scramble the information and send it to the bank in a language only the bank’s software can decipher. This significantly cuts down on fraud. It makes it impossible for anyone to intercept the messages between the card and the bank.
5. Enhanced Card-to-Bank Communication
When consumers pay with an EMV card, they have to dip instead of swipe. When they put the card in the card-reader machine, a process called dipping, it takes a few seconds longer than the standard swipe. But during these seconds, the chip is sending a steady flow of encrypted information to the bank to make sure that the cardholder is actually the one using the card. Although this process initially requires some extra patience, the technology will improve and gradually get faster.
6. High Rate of Success
By the end of 2017, almost 85% of all American credit cards had been converted to chip-enabled cards. In the first year of use, Visa reported that companies that adopted the EMV-chip technology saw a 58% decrease in counterfeit credit card fraud, which shows how efficient these cards really are.
7. Room for Growth
The first stage of EMV technology in the United States is called chip-and-signature. That means that you don’t have to enter a PIN. Eventually, however, the country is likely to shift to the more secure chip-and-PIN method.
When you’re running a financial institution, it is important to understand that no form of technology is 100% secure. Even though chip cards are far more effective at preventing fraud than the old magnetic strip cards, it is still necessary to take precautions to keep your customer’s credit card and banking information as safe as possible. Let us help.
At SQN Banking Systems, we work hard to make fraud protection easy for our clients. To learn more, contact us today.