What is the difference between EMV and NFC?
EMV, named for its creators Europay, MasterCard, and Visa, is a micro-chip that is embedded into debit and credit cards. EMV serves as a replacement for the magnetic strips that have become synonymous with credit and debit cards in the past. Every time a card with a magnetic strip is swiped, the same information is used, making it rather simple for a thief to copy the information and use it at will. With an EMV, each time the chip is inserted into a card reader a unique code is created for that transaction, making a copy of the transaction code useless to thieves.
NFC, or near field communication, allows two devices to exchange data when placed within several centimeters of one another. Both devices must have an NFC chip for the transfer to be successful. Whereas EMV is specifically designed for financial transactions, NFC chips can also be used to retrieve data like a coupon code or website address with just a tap. NFC communicates with a radio frequency and can be embedded into a card with EMV so that payments can be made securely with just a quick tap.
Types of EMV:
EMV credit cards requiring a PIN will operate much like debit cards. After swiping or inserting the card into a terminal, the customer will enter their PIN to complete the transaction. This type of EMV is the most secure. In addition to having the physical card, a thief would also have to know the cardholder’s PIN, creating an additional safety barrier against fraud.
Chip-and-signature EMV cards function just as magnetic strip credit cards do. After the EMV card is inserted or swiped on the terminal, the cardholder signs for the purchase. This method is not preferred as a matching signature is not a prerequisite transaction approval, but merely a method of pinpointing fraudulent charges after the fact.
EMV in the U.S.
While consumers in the U.S. may not be used to this type of credit card transaction, most of the other major markets in the world have been using EMV for a decade or more. So why is the U.S. so far behind in EMV technology? There is more than one answer.
- EMV has the ability to work offline and approve transactions, whereas cards with magnetic strips must be online in order to contact the issuer for approval. In the U.S., connectivity is not commonly an issue; in other countries that is not always the case, driving them to seek a solution with EMV cards.
- In the past, credit card fraud was more or less equally spread out across the major markets, the transition to EMV cards in Europe and Asia has left the U.S. vulnerable to theft. As the last major market still using magnetic strip cards, the U.S. has accounted for roughly 50% of credit card fraud despite only processing 25% of the world’s credit card transactions. This spike in fraudulent activity has been a huge motivating factor in pushing to make EMV cards the norm in the United States.
It may seem like there will be a massive change in credit and debit purchases come October 2015, but this is only partially true. While the liability shift will be in full effect at that time, it will likely take several years for all merchants to become EMV compatible. Consumers will begin to see more and more terminals ready to be used throughout the coming years rather than all at once.
Why this is important:
Beginning in October of 2015, credit card issuers and merchants will be held liable for any fraudulent charges if they are not EMV compliant. Meaning that if a credit card is stolen and used and it is not EMV equipped, the credit card issuer will be held responsible for the charges. If an EMV enabled card is stolen and must be swiped, using the less secure magnetic strip, because the retailer does not have EMV compatible hardware, the liability is theirs. Being prepared and educated as a consumer will allow an easier transition into “dipping” and chip-and-pin cards once EMV cards and terminals begin to appear more frequently.
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