EMV Chips Pave the Way to a Safer Tomorrow

Many of us have received a debit or credit card from our bank with a small gold chip visible on the left side of the card. It is an important update in credit and debit card payment technology, but do you know exactly what that chip does? In terms of payment processing and from a security perspective? After reading this article you should have a better idea of what happens when you “insert” your new, chipped card into an Europay, Mastercard, Visa (EMV) card reader and how it protects you.

What does the Chip do? 

The microchip in your new credit/debit card creates a unique digital signature every time it is used at an EMV terminal to better protect against fraudulent charges. The old magnetic stripe verification, on the other hand, stores static data on the card. The unique digital signature is created using cryptographic algorithms like a message authentication code (MAC) or a digital signature to verify the financial transaction is coming from the stated sender and that it has not been changed in transit. Since the chip creates a new signature each time, it makes it extremely difficult to replicate.

The traditional magnetic stripe cards have major security flaws, one of which is card “skimming”. Here is a video of a card “skimmer” being installed in only 3 seconds. A “skimmer” is a card reader installed by a malicious actor on credit card payment terminals or ATM’s to record and steal the data from the magnetic strip on the card. The thief can then create cloned cards or to make illegal purchases. Many “skimmers” also have cameras installed to record the input of PIN numbers or false number pads that fit over the existing keypad to harvest your PIN. With EMV chips, however, even if your card is “skimmed”, the thief cannot use the information because it is different for each transaction.

Why does it matter?

According to securitymagazine.com, nearly half (47%) of the world’s credit card fraud happens in the United States. Another interesting statistic from the same article reports that once the United Kingdom implemented EMV chip cards in 2003, their related fraud sustained a 70% reduction over the next 10 years. These stats show us two things: That the magnetic stripe can’t get out the door soon enough and that once it does, we can expect to see a large drop off in credit/debit card fraud.

With millions of hard earned dollars being stolen every year and hundreds of millions of Americans with debit/credit cards, it will be a huge relief once EMV chip cards have been fully implemented into the American economy.