The Chip in the Card: EMV Chip Promises Increased Security for Payments

Have you recently received a new credit card with an EMV chip in it? If you are like most people, you probably don’t have all the facts straight on the new device planted in that familiar piece of plastic. This chip, which seems innovative in the States, is meant to provide security, yet it is limited in the security it provides and is far from revolutionary. As stores slowly change over to chip readers, and as consumers adjust to no longer swiping, there are five things you need to know about the new inhabitants in our wallets.

EMV Is Nothing New

The EMV system is not a new thing to credit cards. What, you ask? You are probably thinking that you have been swiping your card for as long as you've had a credit card. It is part of the culture of the card. You are right. I agree and although Europay, MasterCard and Visa (the three companies that constitute the EMV consortium) has only been in use in the United States since 2014, its first version was released in Europe in 1994. The inception of an automated chip card dates back even further to 1968 and 1969 when the first patents were filed by Helmut Grottrup and Jurgen Dethloff. While this more secure technology was available, we in the States continued to swipe versus dip.

Fighting Fraud

The big change in the credit card industry came out mainly because of fraud and counterfeiting. The chip was put in place in the States to help protect against the deviants, hackers and thieves. But is the chip as protective as we have been led to believe? There are some definite benefits to the chip over the magnetic strips. On traditional cards, magnetic strips store unchanging data; anyone who copies a magnetic strip can easily replicate the data because it never changes. Whoever accesses the data gains the sensitive card and cardholder information necessary to make purchases. That makes traditional cards a prime target for counterfeiters who convert stolen card data to cash. But this is the only thing the chip is protecting us from. All other sorts of credit card information is still at the same risk as it was prior to the chip. More still needs to be done.

PIN Adds Security

According to the National Retail Federation, a lobbying group for American retailers, even with a chip, cards should require consumers to enter a PIN. This would be the next line of defense, making it even more difficult for fraudsters to make charges once they obtain the card numbers. Unfortunately, in the U.S. chip-and-PIN cards will be slow to make it to market and there are no plans yet for chip-PIN-signature cards which are already in place in Europe, and which provide the best protection against fraud. (For more on security, see Stopping Social Engineering: Who's Looking Over Your Shoulder?)

Deadlines

The plan was for the EMV cards to be switched over by October 1, 2015. However, predictions are that still only 96% of people will have EMV cards in hand by the end of 2017. Data shows that the cardholders who were issued EMV cards received them from the larger banks. And, it wasn’t just the banks that weren’t prepared for the switch. Less than one-third of businesses were prepared for the October 1 shift to EMV cards.

Dip Your Chip

“Swipe your card” is one of the most common phrases in our daily life. Now at the few outlets fully utilizing new EMV card readers I don’t hear the new phrase, “Please dip your chip.” With technology constantly changing, is swiping and dipping the limit? Of course not. EMV cards also support contactless card reading, known as near field communication (NFC); terminal scanners are able to pick up the card’s data from the embedded chip. These transactions will be the friendliest because all you will have to do is tap. These cards are not yet available; one day swiping and dipping will be a thing of the past – it will be about tapping and we will then have a whole new set of security issues to address. (To learn more about payment trends, see Mobile Payment Systems: We Put Them to the Test.)