Be prepared for a credit card upgrade, as banks have begun swapping out regular magnetic strip credit cards for something a little more secure.
Chip cards (Smart Cards/Circuit Cards) are not a new concept. They have been around for many years and are used widely in some parts of the world like Europe.
Chip cards look exactly like most of your current debit/credit cards with one exception: a small magnetic chip on the front, called EMV microchips.
EMV (Europay/MasterCard/Visa) is a global standard for payment terminals and cards, which aims to improve payment security.
Magstripe cards are a type of card that stores and transfers data within a magnetic stripe. Common in the United States, we’re all familiar with seeing the stripes on credit cards, debit cards, public transportation cards and even office ID cards. Typically, users must provide their signature or a pin at the end of payment.
Security professionals deem the magstripe card form of payment as less secure than EMV because it stores cardholder account information within the “tracks” on the magnetic strip.
Hackers obtain information through point of sale breaches and skimmers. All you would need to do is swipe your card on a compromised point of sale system and hackers are able to duplicate data held on the strip.
Smart cards differ in the fact that a unique code is given for each purchase, therefore making it increasingly difficult to replicate. Magstripe card data can be copied over and over again because it does not change, making them prime targets for counterfeiters to convert stolen card information into cash.
Granted, you now have more protection against fraud, it causes an increase in average checkout times.
EMV is a system where the card is not supposed to leave the cardholders hand.
Each EMV 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.
Magstripe transaction usually take up to five seconds, while EMV chip payments average 10-15 seconds.
We will begin seeing a lot more retailers switching to EMV-enabled credit card terminals in part of the liability shift taking place October 1, 2015.
After several high security breaches, including Target, Home Depot, and Staples, that left banks responsible for retailers negligence, financial institutions decided to improve security measures.
Currently banks who issued the card are responsible for reimbursement of fraudulent charges. With the liability shift the person with the least protection will be held responsible for the bill.
The EMV upgrade is not a mandate but large merchants have an incentive to upgrade credit card processing terminals even though it will be costly.
After Target’s breach the retailer pledged $100 million dollars to upgrade to EMV payment systems.
Chip cards will still have vulnerabilities like physically being stolen but we should expect to see a large decrease in counterfeit activity.
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