The EMV Update
At the beginning of 2017 we offered a blog titled Implementing EMV. This global standard for credit card payments based on chip card technology takes its name from its developers—Europay, MasterCard, and Visa. Finally, the sweeping move to EMV credit card technology has begun in the United States. The number of Visa chip cards in the U.S. has increased by 182% since October 2015.
To summarize this technology, the chip in the card encrypts information by offering something called a data dynamic. Think of this dynamic as a one-time use password that is created to protect each transaction at the terminal. The ability of this smart card to generate each particular password per transaction is a key factor in EMV’s security, decreasing credit card fraud on card-present transactions. For merchants who have completed the chip upgrade, counterfeit fraud dollars dropped 58% in March 2017 compared to a year earlier.
As the chip card makes great strides to replace magnetic strips, we bare witness to the great conversion from old technology to new. Behavior patterns historically reveal that there tends to be a lag and a pinch of apprehension whenever the collective population is pressed to make a change. We have stretched across that hurdle and are headed into a breath of compliance. As with all things, though, regardless of their nature, there are two sides.
The upside of using EMV
- Highly secure in protecting consumer data versus the magnetic strip due to encrypted microprocessor chip.
- True. Chip cards are encrypted to offer a greater level of protection than ever before. What about privacy though? An older technology, Radio Frequency Identification (RFID), emits a radio frequency, continuously broadcasting your card’s location, whether in MacDonald’s or Wal-Mart, to your bank or other issuing organization.
- Good news…the computer chip in an EMV card does not use this technology at all. Invasion of privacy is no longer an issue with EMV technology. Bottom line, your EMV card’s computer chip does not transmit an RFID signal. Rest assured.
- New revenue outlets can be created through chip cards and smartphone payments via marketing strategies and loyalty programs that can be transmitted directly from the merchant to the card or device.
- 50% of U.S. storefronts now accept chip cards.
- Consumers are becoming familiar and more comfortable using this new technology of paying for goods and services.
- 62% of Visa credit and debit cards are chip cards.
Financial institutions, consumers, and merchants want their financial data secure and uncompromised, first and foremost. Feeling protected from predators and hackers is obviously a single pointed focus. Once security is there, spending ensues and other revenue streams can be born. While it is easy to list the pros and see the traction the chip card is making in the United States, the downside is often overlooked. Yet, there is another side.
The downside of using EMV
- Enormous expense. Merchants will be required to purchase new terminal and POS systems. Some estimates show the number of new POS terminals needed to be 15 million, which could cost as much as $7 billion to replace.
- More than 600 million credit cards and 500 million debit cards are becoming dinosaurs, extinct. The cost to replace these cards could be in the range of $1.4 billion.
- The EMV cards are not perfect though. These cards still require a signature with in-person transactions, so if your card is stolen, all the thief has to do is forge your signature, which is easy, and then make the purchase with your card.
- A side effect of the chip card is a shift to online fraud. The creative criminals, with a surge in online purchases through retailers such as Amazon and eBay, have resorted to stealing credit-card numbers or opening new accounts with false credentials to target the online marketplace. In short, the chip card has no built in protection when you use them to make online purchases. Vulnerability is there, and a hacker could be right around the corner. To be aware of such side effects is like implementing preventative medicine.
The chip is here, and it looks like it’s here to stay. Over 2.3 million merchant locations are now accepting chip cards, a 473% increase since the beginning of EMV migration in the U.S. The $8 billion or so the entire program may cost is a small price to pay in comparison to the $8 billion in credit card fraud the United States realizes annually. We here at Key Centrix are on board with the chip card and its terminal, and we are enthusiastic to share our FlexTrax Point of Sale with our community and the world.