How Your EMV Chip Fights Fraud

By now, most are familiar with the EMV chip, as almost everyone has been issued a new card by their bank containing one. EMV cards are equipped with a microchip that holds your account information, and is read whenever you dip your card in a terminal. This chip ensures your card is safer and better encrypted than its predecessor, the mag stripe card. Chip cards have been around for over a decade, but have mainly been present in Europe, where fraud declined by around 50% once instated. The US has been filtering out magnetic stripe cards for chip cards in the past few years, once Europay, MasterCard, and Visa banded together to create this global standard, in hopes of decreasing card fraud in the US. Although we all know that it is ‘safer’, there is still some confusion on exactly how. Here’s a quick guide to understanding what makes EMV cards safer than mag stripe cards.

For one, EMV chip compliant merchants will need to maintain software upgrades and make sure equipment is up to date, eliminating areas where hackers could slip through the cracks due to outdated technology. This technology includes increased protection against card skimming, increased protection against the hacking of mag stripe cards, and dynamic authentication possibilities.

These chips are what is used to authenticate each transaction. With EMV, each transaction is approved using a unique authentication code, which cannot be used again. If for some reason the information is breached and obtained by thieves, an authentication code cannot be used again to make a purchase or create a new card, rendering the stolen data useless. This discourages thieves from making the attempt, because the desired information becomes null.

Additionally, magnetic stripe cards contain unchanging data, which makes it far easier for scammers to grab this information and replicate it over and over again. However, if a hacker were to steal chip information from a specific point of sale and make a new card, card duplicating methods used on mag stripe cards wouldn’t work, and the card would simply be denied. These cards are virtually unable to be duplicated for this reason.

EMV chip cards also provide better encryption. While magnetic stripe cards send bank information right into the terminal and the software encrypts it, chip cards contain built-in encryption, right in the chip itself. When you make a payment and insert your chip card into a terminal, it also communicates with the terminal in an encrypted code to ensure authenticity.

The data in chip cards is constantly changing, which makes it increasingly difficult for scammers to obtain. The lengths someone would have to go to are quite extreme. With mag stripes, a “skimmer” can easily be made for around $30 to grab information. With EMV chip cards, however, someone would have to get into the physical chip circuit and manipulate things to get any bank information. This is extremely difficult, and would require equipment costing hundreds of thousands of dollars, even millions. Fortunately, this is not something your average scammer can obtain.

With the introduction of EMV, paying is becoming much safer for consumers. Countries that have adopted EMV chip cards have seen a significant decline, and we can only hope for a similar trend in the US after fully adopting it, too.