Editorial Policy

With EMV chip cards, here’s what you need to know

Jeff Herman

September 28, 2015

Chips instead of stripes. Dipping instead of swiping. Credit card changes are rolling out across the country. And the process will take months if not years for everyone to get on board.

Javelin Strategy and Research projected 70 percent of U.S. credit cards and 40 percent of debit cards will have chip capability by the end of 2015, but not all merchants are chip-ready. Visa predicts it will take four to five years before reaching 90 percent of transactions being made with a chip card at a chip terminal, says spokeswoman Sandra Chu.

Here’s what you need to know for the months ahead:

What is EMV?

EMV stands for Europay, MasterCard and Visa, which together developed the standard for the chip cards and the terminals that have become the norm in Europe, Canada and much of the rest of the world.

Why the change?

The switch to chip cards is all about reducing fraud.

That new square chip on the front of your card transmits unique data each time it’s used at a store. It’s not like a magnetic stripe card that transmits the same code every time it’s swiped. And a chip card can’t be copied easily, as a magnetic stripe card can.

“Everybody benefits from a reduction in fraud; merchants by adopting early,” says Dina DeMerell, director of card services at Chase credit cards. The Oct. 1 deadline shifting fraud liability to the point of sale from banks and card issuers “turns the dial up to move quickly.”

But chip cards aren’t perfect when it comes to preventing fraud.

What they don’t do is address fraud tied to online purchases, and that’s where fraud is increasing.

When in doubt, just swipe, and the terminal will tell you what to do.”
— Dina DeMerell,
director of card services at Chase credit cards

“As commerce moves online, fraud will follow,” said Philip Andreae, vice president, Field Marketing Financial Services Institutions at Oberthur Technologies, a maker of credit cards and ID cards. “And it will move to the path of least resistance.”

What will chip card users do differently?

Just dip – or insert – the chip card in the base of the terminal instead of swiping the magnetic strip card, says Jon Krauss, senior manager of card product management at Discover.

Then you’ll have to pause. “It takes a little bit longer to read the chip,” says Doug Johnson, senior vice president, payments and cybersecurity policy, at the American Bankers Association.

Don’t forget to remove your card, Krauss adds. Leaving a card behind is one of the most common mistakes, so some terminals emit a noise as a reminder to pull out the card after the data is transmitted.

There still will be glitches. “Experiences could vary by terminal,” Krauss says.

“When in doubt, just swipe, and the terminal will tell you what to do,” DeMerell says.

Or the clerk will guide you. For major retailers with global operations this transition is something they’ve gone through in other countries, so their clerks should be trained to help at the registers.

Will there be confusion?

“Absolutely,” says Andreae. Though card issuers and banks have been engaged in a full-court press to educate cardholders, and big retail chains have been prepping for this for months, the EMV switch is especially lagging at small businesses.

A majority of small business owners (51 percent) were unaware of the Oct. 1 EMV liability shift, according to the Wells Fargo/Gallup Small Business Index conducted July 6-10.

The ABA’s Johnson expects less than half of small businesses – and maybe as few as a third – of small businesses will have migrated to chip readers by the end of October.

At small businesses, the EMV shift likely will be more swift at jewelry stores and other high-end retailers where purchase prices – and the risk for fraud – are greater, Andreae says. They have more to lose because of the liability shift.

As commerce moves online, fraud will follow. And it will move to the path of least resistance.”
— Philip Andreae, vice president, Field Marketing Financial Services Institutions at Oberthur Technologies

Why did it take the U.S. so long to switch to chip cards?

“There was no impetus to do it,” Andreae said. Then credit card fraud doubled in the United States in the past seven years. “When we started seeing fraud migrate to the U.S.,” it was time, he said.

And it took time for the industry – card issuers and banks – to move as a whole, DeMerell says.

Under EMV, most of the rest of the world has switched to chip and PIN, but U.S. card issuers are – for the most part – going with the less secure chip and signature instead. Why? The goal has been to make the transition as simple for Americans as possible, Discover’s Krauss said.

What if I lose my chip card?

There’s no difference from a magnetic stripe card. Call your card issuer if you can’t locate your card, ABA’s Johnson says. But the number of lost and stolen cards category isn’t growing markedly, Chase’s DeMerell said. “Still, a chip cannot be replicated” easily like a magnetic stripe card, she said.

What else do I need to know?

The new chip cards are more durable, Andreae says, good for up to 400,000 reads. Environmentally, the chip cards can weather the cold of the Arctic and the heat of the Sahara.

If you leave a chip card in your pocket and it goes through the wash, the chip is encased in epoxy to protect the contact plate, he said.
The same chip technology is used in ID cards in some countries, and those cards have lasted more than 10 years.

“The printing on the card will wear out sooner than the chip,” he said.

Anything not changing?

The card user isn’t affected by the liability shift. “The customer still has zero liability for fraud” involving point-of-sale transactions, Johnson says.

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