Credit card chip technology is a security measure to protect our personal financial information from theft and fraud.
How? And what does this mean for your business? We’ll get into it in just a moment.
Another day, another threat to our security, right?
It seems like every time we turn on the news or read the newspaper (for those who still do) we see a new credit card security threat. Criminals good at making consumers worry about the security of their personal information.
And credit card companies have had to change their security measures and their approach to combat these security threats.
We’ve all used credit or debit cards. We all know how they work. The little magnetic stripe on the back of your card is the most important part of the card. It holds all our personal information regarding our credit card/bank account.
The problem with these mag stripe cards is the information stored on them never changes.
So, if a criminal comes along and steals a credit card, all he has to do is duplicate the information over and over again to buy whatever his evil heart desires.
Sometimes we don’t realize it has happened until it’s too late. They have already gone on a massive shopping spree on our dime.
The newest measure credit card companies are taking to fight this threat is chip technology in credit cards.
Chip and PIN cards, or chip and signature cards, are credit cards which have a chip built into them.
This EMV chip, as it’s called, does all the work the mag stripe used to do but with better safety features.
How credit card chip technology works
The chip has circuitry built into it which is activated when it is inserted into a card reader.
The biggest difference between these cards and traditional mag stripe cards is the data on the chip changes with each transaction due to a dynamically created encryption code.
So, for example, when you go to the grocery store or out shopping, it creates a unique transaction code for every purchase you make. This unique code cannot be used again.
This means a criminal trying to duplicate the information from the transaction is unable to.
Catastrophe averted!
This isn’t necessarily a fool proof method for eliminating security threats. And chances are criminals will eventually develop a way to still get into our personal information (instead of getting a regular job). But, it is definitely a big step in the right direction.
EMV cards process payments in two ways: credit card reading and transaction verification.
Instead of a customer swiping their card in a particular direction through a reader, all they have to do is “dip” it into a reader. This means they insert the card into a terminal slot, enter their PIN, and wait for it to process.
When the card is dipped into the reader, information flows between the built in chip and the issuing financial institution. Once the legitimacy of the card is verified, it creates the unique transaction data.
It isn’t quite as quick as the mag stripe method, but pretty close.
The card must be left in the reader until the reader prompts the customer to remove it. If the customer pulls it out too soon, the transaction will most likely be denied.
Card “dipping” isn’t the only option available with chip and pin cards. Some chip cards have near field communication technology built into the chip. This means the customer only has to tap their card against a terminal scanner and it picks up the card data from the embedded chip in the card.
There is a move to have EMV cards made with dual interface technology so customers can dip or tap their cards depending on the terminal.
Contactless terminals are very expensive for retailers right now, so it might be a while before we see many terminals with it.
Some chip cards require a PIN to be entered to activate the card for purchasing items. Others still require a signature for verification. It depends on the verification method associated with the card. Whether it is a credit or debit card does not matter.
Customers will still be able to use their PIN cards even if a terminal doesn’t have the chip reader.
But, as of October 1st, 2015, if your (or any) business doesn’t have an EMV compliant terminal and a fraudulent card is run through your store, you are reliable for the cost.
So be sure you can take EMV cards!
All EMV cards still allow the customer to sign for purchases as a secondary verification method.
The United States is the last major market to switch to chip card technology. It’s already commonplace in other countries. Those countries have already seen a huge reduction in fraud cases since they switched to chip cards.
As far as the future of credit cards is concerned, this credit card chip technology seems to be where we are all headed.
The future of our security looks a little brighter because now because of it.
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