EMV Technology Chips Away at Credit Card Fraud

154025479FoxBusiness.com is reporting on how, in the response to the recent high-profile hacking incidents over the past year, technology is being developed to further security for credit card purchases.

Expect to see a newly established global standard for credit cards called EMV, the acronym for Europay, MasterCard and Visa. The new EMV cards harbor computer chips and work with authentication technology at the point of sale.

“These new and improved cards are being deployed to improve payment security, making it more difficult for fraudsters to successfully counterfeit cards,” says Julie Conroy, research director for retail banking at Aite Group, a financial industry research company. “It’s an important step forward.”

“I predict that by the end of this year, every household will have at least one card with a chip,” says Martin Ferenczi, President of Oberthur Technologies, the leading global EMV product and service provider, quoted in the post.

As the only full-service point of sale provider — from software development to franchise incubator to ongoing support — part of Sintel’s commitment to our customers and industry is to share ideas and information. Whether you’re a first-time franchise hopeful, a small business owner or an established chain, it’s always smart to stay on top of the latest point of sale security best practices to achieve financial success.

Here are some of the highlights of the FoxBusiness.com report, “8 FAQS About New EMV Credit Cards”:

Traditional credit and debit cards have a magnetic stripe that contains unchanging data, which has made them prime targets for counterfeiters to convert stolen card information into cash. “If someone copies a mag stripe, they can easily replicate that data over and over again because it doesn’t change,” says Dave Witts, president of U.S. payment systems for Creditcall.

To identify the new generation of cards, look for a small metallic square. That’s the computer chip, which makes EMV credit cards more secure than traditional cards.

Each time it’s used, the EMV card’s chip creates a unique transaction code, one that cannot be used again. Again, Witts: “If a hacker stole the chip information from one specific point of sale, typical card duplication would never work, “because the stolen transaction number created in that instance wouldn’t be useable again and the card would just get denied.”

Ideally, the “dynamic data” created by chip cards will significantly reduce fraud rates in the U.S., as it did when first introduced seven years ago in Europe.

Each EVM card payment is processed in two steps: card reading and transaction verification. However, the cards are read not by swiping, but by “card dipping” into a specialized terminal slot and waiting for it to process.

As data flows between the card chip and the issuing financial institution, the legitimacy of the card is determined and the unique transaction data is created. The process isn’t as quick as the current magnetic-stripe swiping. Witt says, “A little bit of patience will be involved.”

Worldwide, dipping isn’t the only option at the point of sale, as EMV cards also support contactless card reading, also called near field communication. But experts say to expect the more expensive dual interface systems to arrive later.

Chip-and-PIN cards, expected sometime in 2015, are expected to operate just like the checking account debit cards we see today. For now, Conroy doesn’t see many EMV issuers requiring a PIN.

In the past, liability for consumer losses from in-store transactions conducted using a counterfeit, stolen or otherwise compromised card fell back on the payment processor or issuing bank, depending on the card’s terms and conditions. After October 1, 2015, liability will shift to whoever is the least EMV-compliant party in a fraudulent transaction. (Fuel dispensers have until 2017 to migrate to EMV.)

Experts expect EMV compliance to take a while, despite the deadlines. The Aite Group estimates that by the end of 2015, approximately 70 percent of credit cards and 40 percent of debit cards in the U.S. — 1.1 billion cards total — will support EMV.

So that merchants can adjust during the first round in the transition, EMV cards are expected to be equipped with both chip and magnetic-stripe functions. Terminals will be aware enough to walk consumers through the process and prompt buyers to dip, or swipe the cards, if necessary.

The U.S. is the last major market still using the magnetic-stripe card system. Hence, chip card users should experience fewer issues when traveling abroad.

Read the full FoxBusiness.com post here.

For more insights into point of sale (POS) security, check out our related posts, Securing Point of Sale’s Points of Fail and Safer Consumer Transactions May Be In The Cards.

Just as we share our vast point of sale experience and expertise with startup owners in order to help them make the best decisions from the very beginning, we at Sintel Systems are happy to share articles, advice and commentary about retail point of sale and security.

Whether you’re a first-time franchise hopeful, a small business owner or an established chain, it’s imperative to stay on top of the latest point of sale best security practices to achieve financial success.

If you are interested in learning more about Sintel’s point of sale systems and how our knowledge and support can impact your future success, call us for a complimentary phone consultation.

Sintel Systems is the only direct to end user full-service provider of tailored Point of Sale systems across retail, restaurant and service industries, including frozen yogurt shopspizzeriassushi restaurantscafés and retail stores.

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