What is an EMV Chip Card and How Does it Work?

What is an EMV Chip Card?

EMV Chips are currently the global standard for authenticating credit and debit cards. EMV stands for Europay, Mastercard, and Visa. The United States began migrating to EMV Chip Cards in late 2015–but the technology was widely used in Canada and Europe before its adoption in the states.

EMV technology has become relatively common in the U.S. since its adoption. Most cards are now outfitted with a magnetic strip on the side (which was the previous technology), but also now include a rectangular chip (this is the EMV chip).

There are no laws in the U.S. that require a business to process EMV, so it is each business’s choice as to whether they wish to include the EMV payment option when processing payments.

How does EMV Card Reader Work?

With the magnetic stripe on cards, we were accustomed to swiping our cards through a card reader. This reader processed the information on the strip and accessed the proper data and accounts. EMV has the same goal, but with a different approach.

\With EMV, we insert a card into a reader. The reader locks the card in place and accesses our information. The card and the reader agree upon a unique ‘password’ for this transaction. This process makes perpetrating fraud much more difficult.

Why do business’s choose EMV Chip Card readers?

The U.S. transitioned to EMV due to the fact that it is less susceptible to fraud. Magnetic swipe transactions rely on signatures at a point of sale, where EMV transactions rely on cryptographic algorithms.

Banks and card issuers argued that this more advanced technology should reduce fraud and were successful in shifting the liability of fraudulent processing to the businesses. That is to say, a business may be found liable for a fraudulent transaction if they have not elected to transition from a magnetic swipe to the EMV technology.

Of course, this all pertains to point of sale transactions–businesses that rely on face-to-face payment processing (i.e.: retail). Many businesses rely on online payments and recurring billing, and in such cases, EMV technology plays a minuscule role. For businesses that accept payments that don’t include a face-to-face transaction at a point of sale terminal, EMV technology is hardly a blip on their radar. For them, software like what we built at PaySimple plays a huge role in managing their recurring revenue.

Do you need an EMV Chip Card reader?

However, if your company does business at a point of sale, you’ll certainly want to consider whether obtaining an EMV reader is in your best interest. To answer this question, you should assess your potential risk at your point of sale terminals. For example, if you own a gym, chances are the majority of your revenue comes from recurring billing. Sure, you likely have a point of sale terminal or two. You likely sell water, smoothies, and maybe some sports gear.

Before transitioning to an EMV reader, consider two things:

1. Your percentage of revenue that is processed at your point of sale terminal

If less than 15% of your revenue is processed at a point of sale terminal, there isn’t much cause for concern. Still, the choice to reduce your liability is ultimately up to you and your management.

2. Your history of accepting credit card fraud

If you don’t have a history of processing credit card fraud, there is little concern that you might need to reduce your liability. Still, the choice is up to your business and your risk tolerance.

So, while much of the U.S. is now processing EMV cards at their point of sales terminals, an enormous amount of business continues to be conducted without EMV readers.

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