Chances are, you’ve heard a lot of talk about the new credit cards coming your way, or maybe even some buzz about EMV payment technology. You may even have a sparkly new card or two — complete with those little silver chips — in your wallet. But what’s the deal with that chip and how does it really work? Below, we answer some common questions about how the arrival of that new credit card will affect you.
1. What’s EMV?
EMV — which stands for Europay, MasterCard, and Visa — is the credit standard in much of Europe and Canada, and, to a lesser extent, in Africa, the Middle East, Russia, and Asia Pacific. It’s currently being introduced to the American market because it is widely considered a safer method of using credit. And given that the United States is responsible for 47 percent of credit card fraud worldwide — despite holding only 24 percent of the global credit card volume —integrating a more secure method has been in the works for awhile.
2. How is it different?
The magnetic stripe on credit cards contains static data necessary for each transaction. Under the magnetic stripe method, when you swipe the card, that information is passed to the machine and processed, but it doesn’t ever change. If a fraudster were able to capture the data on that single transaction, they could continuously reuse the information. Some may even create their own credit cards by duplicating the data on yours, and use it openly at nearly any retailer. The reuse of this stolen data is called counterfeit fraud.
Although they will still have magnetic stripes during the transition phase — and can be used in that way — EMV-chip cards have the added security measure of creating a unique, single-use code for every new transaction when the chip is used. Even if someone were able to access that purchase information for a chip-based transaction, the credit card would be denied when it was reused because the transaction code would have already been processed.
Although this will not completely eliminate data breaches, it has shown to be effective in fighting fraudulent charges. In the United Kingdom alone, the introduction of EMV technology has cut counterfeit fraud by 70 percent since 2003. However, most cards being used in the U.K. employ a personal identification number (PIN) — often considered a more secure verification method — rather than a signature, which is the current standard being rolled out in the American market.
3. Why do I need a PIN or signature?
Because Americans were already accustomed to signing for their credit card transactions, “chip-and-sig” — an EMV card requiring a signature for verification — is the primary transaction verification method being offered in the U.S. For now.
Cards requiring a PIN for verification, like those primarily used in Europe, will likely be rolled out once EMV technology is more widely adopted. However, your card issuer will determine which verification method to assign. If you’re unsure which verification method to use for your new EMV card, contact your credit or debit card issuer.
That being said, neither a PIN nor a signature will always be necessary for all transactions. Just like today, some businesses may opt not to require a PIN or signature verification for purchases under $25, which are considered “low risk.”
4. How will using my card change?
In many ways, your experience of paying and managing your card will stay the same. However, the traditional swiping action — and relative speed — of using your card for purchases will drastically change. Instead of swiping, you will be required to dip or insert your card into the reader and wait for the transaction to complete before removing it (like at some ATMs). The transaction will also take longer, as data is exchanged between the chip and the system.
The card reader will prompt you to sign or enter your PIN, and will indicate when your card may be removed; this means you will need to pay closer attention to the text on the reader, and keep your card handy throughout the transaction. Although some cards will allow a quicker contactless data transfer, meaning you will only have to place the card in proximity with the reader (or “tap” it), this is less prominent in the market now and may never be fully adopted.
One area where this change will be more drastic, however, is at restaurants. One of the security standards of EMV is that the transaction information cannot be adjusted after the fact — meaning restaurants can’t add a tip once the customer has left. Because most of us are accustomed to adding the tip after the fact, this may be the most difficult aspect of the EMV transition for many.
Some sit-down restaurants will integrate table-side credit card machines, meaning the server will actually bring the credit card reader to the table so the tip can be added right on the spot by the customers themselves. However, some restaurants, particularly those that are delayed in purchasing new equipment, may not, potentially making tipping a more personal process.
For those restaurants that do not have a table-side system, you will be required to communicate your intended tip to your server in advance of them taking your card for processing. This could be done either by simply telling your server as he or she leaves with your card, or by indicating the amount on the bill itself, if for any reason you are uncomfortable discussing the tip.
Regardless of your method, however, it is important that as EMV technology becomes integrated, you take care to ensure you’re still paying your bill, and tipping your server, properly. Although many servers will be trained in reminding you about the new process, the responsibility is still on you — after all, no one wants to inadvertently dine and dash!
5. What happens if fraud does occur with my EMV card?
For you as a consumer, nothing much will change. But if you are a business owner, the landscape may be shifting more than you realize.
Previously, the issuing bank or company most often took responsibility for any fraudulent activity on one of their customers’ credit or debit cards. But as of October 2015, this financial responsibility, once accepted by the credit card issuers, will shift to the credit card vendor (either the merchant’s acquirer or acquirer/processor) — who may in turn pass this fee back to the merchant — if a chip card is used at a stripe-only terminal.*
That’s why it’s so important for business owners everywhere to prepare themselves by adopting the new technology and training their staff on the proper way to use it.
*EMV liability shift does not apply to card-not-present transactions, lost and stolen fraud, or certain card technologies such as Visa payWave. For details, contact your payment card processor or visit www.visachip.com.
Are you a restaurant owner curious about how this transition will affect your business? Check out our article, “What Restaurants Need to Know About EMV.”