As businesses and consumers, we frequently use credit and debit cards to complete our transactions. And if you pay close attention, you may have noticed that the design of our credit and debit cards underwent a significant change about eight years ago. In 2011, EMV chips were introduced to American credit and debit cards. Before this, credit cards were read by payment terminals via the magnetic strip on the back of the card. But why did card providers make this change? And what is the difference between chip vs. swipe?
Some of you might even be wondering, what is an EMV card security chip? An EMV card security chip is the computer-chip located above the first four digits on your credit/debit card number.
EMV stands for Europay, Mastercard, Visa, the three companies that worked together to create the technology in 1994. Although created in the ‘90s, EMV didn’t become the mandatory standard for card payments in America until 2015. However, EMV becoming the standard was inevitable; EMV security is undoubtedly better than the security provided in magnetic strip transactions.
The main difference between an EMV chip card and a credit card with a magnetic strip is the level of data security. Magnetic strips hold your credit card information within the magnetic strip attached to the card. That information, however, is static and therefore, easy to clone and write onto another magnetic strip on a fraudulent credit card. If intercepted, someone can steal your card information in one transaction, making it possible for them to fraudulently use your credit card for future transactions.
In the past, fraudsters have intercepted the information off of a card’s magnetic strip through the use of skimmers–devices that connect to swipe card readers and copy the information being sent to the payment terminal. Once they’ve stolen the information off of your magnetic strip, they can easily create a fake credit card that has a magnetic strip with your credit card information. However, an event like this is not as easy to accomplish when you pay via your card’s EMV chip.
Unlike the magnetic strip, an EMV chip card does not store static (unchanging) data. Instead, when you complete a transaction via the EMV chip in your card, what is going on behind the scenes is that a unique, encrypted, one-time-use transaction code is created within the chip and used to interact with the payment terminal. Because the data within the EMV chip is ever-changing as well as encrypted, it is far more difficult to steal credit card information and create a fake credit card when you pay via an EMV chip. For information theft to occur via an EMV transaction, the fraudster would need to be able to break the cryptography used to encode each unique transaction and extract the valuable card data they are after–a difficult feat to accomplish since they cannot simply intercept the data via a device.
Due to the extra layers of protection EMV security provides, it is extremely difficult to obtain the information needed to create a fraudulent copy of an EMV card. Therefore, it is less likely an EMV transaction leads to fraud.
When it comes to the chip vs. swipe debate, the security provided by an EMV chip is so superior to the magnetic strip that it’s no wonder why EMV has become the standard. In each EMV transaction, a unique, cryptographic, transaction code is created, and unless an attacker knows how to break the cryptography that encodes these transactions, it is not possible for that attacker to steal your credit card information and make fraudulent transactions via your credit card in the future. Because this is the case, transactions processed via EMV chip are far less likely to lead to fraudulent activity or chargebacks. Thus, it should be in every businesses’ interest to support these types of payment transactions. And if you are a consumer paying via debit or credit card, it is best to complete your transaction via your card’s EMV chip, and not by swiping the magnetic strip on the back of your card for these same reasons.