NO NONSENSE
EMV chip (Original photo – newsroom.mastercard.com)
You may have seen an advertisement from your bank about the new EMV chip cards, or some people may already have them. As Europe has used this form of payment for quite some time, many Americans that traveled abroad in the past had trouble using their cards, as they were not accepted. What’s the point of all of this?
By Elie Boutros
Europe has considerable less fraud than the U.S. does. The EMV chip card is more secure. Traditional magnetic strip cards are giving the same information swipe after swipe, making them relatively easy to replicate. EMV cards on the other hand encrypt your information on a mini computer chip. It communicates the information back and forth with the terminal being used. The data on the chip is constantly changing, even if someone got some piece of information it would only be valid for that specific transaction. If a fraudster tries to replicate it, then it would get denied.
Are EMV chip cards 100% fraud proof?
Your bank will not tell you that EMV chip cards are 100% fraud proof for a few reasons:
- Our cards still have the magnetic strip since some merchants don’t have the new technology that accepts EMV chip cards.
- Online and phone transactions may still be processed the old fashioned way.
- In regards to credit cards, the EMV chip cards we are receiving now are transitional cards. They are technically Chip-and-Signature cards, the “full-proof” cards have a PIN (Chip-and-Pin cards).
New fraud liability law
EMV chip credit card theft (Photo – merchantmaverick.com)
In October of 2015 a law was passed that shifted the liability of fraud on transactions involving cards equipped with EMV chips. If I were to use an EMV chip card at a store that did not have a terminal machine that accepts the EMV chip and some fraud occurs, the grocery store is liable to pay for that loss. In a sense the law is saying “The banks did their part to secure your information, but the merchant did not. So the merchant pays up.” If the merchant is equipped to accept EMV chip cards and fraud occurs, then the bank is held liable. If your bank does not provide you with an EMV chip card, then the bank is (and has been) held liable for any loss incurred due to fraud.
The future
Businesses will need to buy new terminals in order to be in compliance with the liability shift. Otherwise they might incur some losses. Overall this is a good thing for all of us. Be patient as it is going to take slightly longer to complete your transaction. Additionally there will be confusion since some places will still use the good old swipe (even though their terminal has the slot to insert the chip.) Embrace the change my friends.
Elie Boutros has a Bachelor’s in Economics from CSUCI. Most of his career has been in the banking industry. His all time goal would be to one day work in developmental economics on a global scale.
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