Monthly Archives: October 2015

Key Differences Between EMV Chips and Encryption for Credit Cards

The credit card industry has been pushing merchants to switch to EMV chip only credit card swipers. Many financial blogs have incorrectly stated that the new EMV chip will reduce credit card fraud immediately. The fact is it is going to take 2 to 3 years for a 60 to 70 percent reduction in credit card fraud, according to Ellen Richey, Visa’s chief enterprise risk officer.

Why is it taking so long? The main reason is that merchants are not required to go to EMV chip only technology. Right now Visa is giving out incentives for merchants to upgrade their swipers to the EMV dip only terminals. Merchants in the U.S have been rather slow to take on the new terminals. Sadly Visa has not decided to make the new terminals mandatory. At the present time most terminals that accept these EMV chip cards you can swipe or dip the card. Dipping will eventually take the place of swiping your card.

Yet progress is being made. Last year only 20 million consumers in the U.S.A had chip enabled cards. As of today, over 150 million U.S consumers now have their EMV enabled credit cards. Europe has had these credit cards for over ten years now, seemingly ahead of the game. Is it no wonder then that the U.S is the prime target worldwide for credit card fraud?

These cards also will not prevent all credit card fraud, just in store fraud. Soon tokenization will take place as well, where a token is granted to and from your device to the merchants terminal. Tokenization, will replace all card data with surrogate values, which is the token. These tokens will be useless if somehow captured by a hacker or thief, which will enable card holders more security than ever before. Businesses will be able to better protect not only their customers but also themselves against fraud threats by implementing this technology. The future will see a perfect mesh of EMV, encryption and tokenization working in tandem to better safe guard against both credit card fraud and data theft.

What is the difference between EMV and encryption? EMV is directly related and tied to the card itself, as thew EMV chip is embedded into the card itself. The encryption that will be added later will be a function of the read head of the credit card processing hardware. This means any card readers or terminals will one day have the ability to encrypt the data that it is reading, turning this data into unreadable ciphertext, which will require a special secret key to decrypt it. Tokenization on the other hand will be a process that starts before any authorization is done, and during the transaction itself. Your data will be placed with this token, and the data’s value will then be passed along mid transaction to the terminal. These tokens are only good at the point of sale, and cannot be reused, so criminals who manage to sniff one out will find them useless. This will be the end of credit card fraud in retail environments. It will not however protect against online fraud.

There is even a Smart Card Alliance Payments Council active right now, which aims to inform both the public, and businesses nation wide about the benefits of EMV. Right now is a vital time for EMV as this knowledge must be spread to consumers, merchants, issuers, acquirers and processors, government regulators, mobile telecommunications providers as well as payments service providers.

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