The ABCs of EMV

NOTE: EMV chips became standard in U.S. credit cards in 2015-16. Nearly all U.S.-issued cards now have embedded chips, and the vast majority of merchants are equipped to process credit card transactions with EMV technology. Below is NerdWallet's article from 2016 explaining EMV technology in the context of the transition from old "magstripe" cards to EMV.

E-M-V isn’t as easy as A-B-C, but it’s a lot less complicated than many people think. We stripped away the confusing tech-speak and nuances that don’t apply to consumers, and came up with some of the essential questions you may have about EMV chip cards. We spoke to EMV expert Philip Andreae, director of field marketing at Oberthur Technologies. Let’s get educated … A-B-C style!

'A' stands for … Am I going to need a new card?

If your current magstripe card doesn’t have an EMV chip, you’ll need a new card to use the chip feature. For now, available EMV cards also have magstripes, but using the chip makes your transactions more secure. Issuers didn’t have a strong incentive to make EMV cards available until October 2015, but you can contact your issuer to find out if you can get an EMV-chipped version of your current card right now.

Current EMV cards include both a computer chip and magstripe to accommodate merchants. Some merchants accept EMV transactions; others don’t. Merchants also got a strong incentive to put in EMV-capable payment terminals starting in October 2015 — more on that later.

'B' stands for … But wait a second, how are these cards more secure?

If you’ve lost faith in the payment industry due to cases of data theft, EMV cards should put your mind at ease. They transmit dozens of pieces of information between the card, the terminal and the acquiring bank’s host, while magstripes only process limited data. Because of this, it’s much easier to skim information from a magstripe card and transfer it to a prepaid card. By using the chip instead of swiping, your transactions will be safer, and identity theft will be much less likely to occur.

To break it down for you, Andreae said there are three words you need to know in relation to EMV technology — authentication, verification and authorization.

• Authentication: EMV uses a mechanism to determine that the card belongs to the cardholder.

• Verification: The issuer can verify an EMV card using a PIN or signature for security, or if the transaction is below a certain amount, no verification method is necessary. This amount will vary based on the card brand, card issuer and merchant.

• Authorization: The issuer can assure cardholders that their cards will be authorized when the terminal can’t be contacted with EMV technology.

» MORE: NerdWallet’s Best ‘EMV With Signature’ Credit Cards

'C' stands for … Can I use an EMV card overseas?

Perhaps. The United States is behind the times in the EMV game — it’s been the standard way to pay in many European, Asian and Latin American countries for years. Most recently, Canadians embraced EMV to avoid the international migration of fraud attributed to magnetic-stripe skimming. However, the form of card verification varies around the world. Chip-and-PIN cards are the preference in Europe, chip-and-signature are the preference in Asia, and here in the United States issuers tend to prefer chip-and-signature cards given their ease of use and affordability.

As a consequence, some overseas’ vendors won’t process chip-and-signature transactions. These mostly consist of kiosks and small merchants. Will chip-and-PIN become the norm in the U.S. in the future? That will be up to the issuers. Theft and loss is just one part of fraud, and the mechanism required to process the PIN card verification method (CVM) is complicated to create.

'D' stands for … Do they make EMV-capable debit cards?

EMV credit cards are the first on the market, but debit cards are following. Oberthur Technologies has just released the OT’s Cosmo RSA v5 — the first MasterCard-certified debit card that meets Durbin Amendment guidelines. Why is that significant? According to Andreae, the barriers to EMV debit technology — including that EMV was built on the assumption that there was a single debit network, whereas the U.S. has 18 — were removed in April 2014. So while EMV debit cards are trailing EMV credit cards, they will catch up.

'E' stands for … EMV chips were supposed to be in all credit cards by October 2015, right?

While a "liability shift" occurred in October 2015, issuers weren’t required to provide EMV cards at that time, and vendors weren't forced to accept them. What did happen is that liability for fraudulent transactions became the responsibility of the party that doesn’t support EMV. So while some merchants and issuers were already supporting EMV transactions before the shift, that doesn’t mean all of them will in the immediate future.

'F' stands for … Fill me in, will EMV change how I pay for things?

EMV changes how you pay, but it’s still easy and you’ll get used to it quickly. With a magstripe card, you swipe and put the card back into your wallet. With an EMV chip card, you’ll insert your card into the terminal and leave it there until the receipt begins to print, and then remove it. Andreae said, “Just follow the prompts on the terminal; they will tell you when to insert the card and when to remove it.”