What is EMV?

What is EMV?
EMV®, the new standard for credit cards, was developed and managed by American Express, Discover, JCB, Mastercard, UnionPay, and Visa. Here's what retailers need to know to accept chip-enabled credit cards.
by Square Nov 02, 2016 — 7 min read
What is EMV?

Everything About EMV

EMV® — developed and managed by American Express, Discover, JCB, Mastercard, UnionPay, and Visa — is a global standard for credit cards that uses computer chips to authenticate (and secure) chip-card transactions.

You probably have a lot of questions. So we’ll walk you through everything you need to know.

Intro to Chip Card Technology

The nationwide EMV migration is well underway. Banks are issuing new credit cards with EMV chips. But what exactly is EMV? EMV or chip cards, are the new, more secure credit cards we’re currently transitioning to in the U.S. EMV chips encrypt bank information making it far more secure than the old magstripe cards. This is important since the United States has a pretty serious issue with credit card fraud.

So how exactly will this affect your business? For starters, you’ll need a new processing device to read the information in the chip cards. And as of October 2015, businesses that don’t have an EMV processing device could be on the hook for fraudulent chip card transactions. (This is something called the “liability shift,” which we’ll go into below).

As you might imagine, EMV is a pretty hot topic right now. There’s a lot of information to sift through. And because any EMV card discussion usually mentions “fraud” and “liability,” it’s natural that it could put small business owners on edge.

But, rest easy—we’ve got you covered. The Square reader for contactless and chip accepts EMV and NFC payments like Apple Pay, protects you from the liability shift.

In this guide we’ll explain what EMV is, how credit card chips work, the liability shift and what it means for your business, and how you can protect yourself and accept chip cards and NFC payments.

Are all credit cards with chips EMV-compliant?

Not necessarily. But the vast (vast) majority of credit cards that have chips are EMV-compliant. If you have questions about your credit card and whether it’s EMV-compliant, contact your issuing bank.

Why are we switching to EMV?

The United States is switching over to chip cards in an effort to curb credit card fraud. In fact, even though the United States has a quarter of the world’s credit card transactions, almost half of the world’s credit card fraud happens here. This is because magnetic-stripe cards use an outdated technology and easy for fraudsters to counterfeit. Chip cards, on the other hand, are way more secure. An EMV credit card chip is actually a super-small computer that’s extremely hard to counterfeit. When the data is transmitted during a card transaction, it’s encrypted which means even if bad guys intercepted the information, they probably wouldn’t be able to do anything with it. So as a country we’re switching to cards with EMV chips. The recent high-profile security breaches at some of the country’s largest retailers have added motivation to make the switch quickly.

How do you process an EMV transaction?

You dip the credit card vertically, chip first, into an EMV-enabled reader instead of swiping it horizontally on a magstripe reader.

What’s the deal with this “liability shift”?

Here’s the lowdown: It used to be that if you ran a fraudulent card, the banks absorbed the costs. But as of October 2015, if someone pays with a fraudulent chip card, and you’re not set up with an EMV card reader, it’s possible that the banks are no longer be liable. So say, for example, a fraudster buys $30 worth of hot sauce from a restaurant with a counterfeit EMV chip card. If the restaurant doesn’t have a chip card reader to process the transaction, it could be on the hook for the $30. Read more about the liability shift in our Simple Guide to the Liability Shift.

Am I legally required to accept EMV?

There’s actually no law that requires businesses to be EMV compliant by the liability shift. It’s up to each individual seller to decide whether or not to upgrade. What has changed is the way that the banks and the processing networks handle fraudulent charges. But even though the EMV liability shift is not officially a law, it’s a good idea to protect yourself by ordering an EMV reader (like the Square Reader for contactless and chip) soon so you can accept the most secure forms of payment.

Why do EMV transactions take so long?

If you’ve paid with a chip card, you know firsthand that they take significantly longer to process than magstripe cards. The card has to be inserted into the reader for the entirety of the transaction — which can take several seconds. This is all while the security technology is at work. What’s happening is that the EMV chip on the credit card is talking back and forth with the EMV reader to make sure you are who you say you are. However, the sluggishness is noticeable — especially for a technology that many people think is new.

The fact that EMV transactions take so long will likely push forward the adoption of faster, more convenient payment methods like NFC. NFC payments— also known as contactless payments — are just as secure as EMV payments but take a fraction of the time because they go through your mobile device.

Is EMV new technology?

No. In fact, EMV has been the standard in nearly every major market except for the U.S. for decades (which you’ve probably noticed if you’ve traveled to Europe or Canada). According to a report by payment-processing company First Data, it’s now estimated that 70 percent of non-U.S. credit card terminals are EMV chip card enabled.

Does EMV chip cards security make a difference?

Definitely. Credit card chips have been proven to help curb fraud — especially in Europe, where roughly 90 percent of credit card terminals are now EMV enabled. The UK has seen a nearly 70 percent decline in counterfeit card transactions since adopting chip cards, according to Barclays. Similarly, in Canada, research firm Aite Group reports that losses from counterfeit, lost, and stolen cards dropped from $245 million in 2008 to $112 million in 2013.

Why has it taken the U.S. so long to get on the EMV bandwagon?

Switching to EMV seems like a no-brainer, so why have we been dragging our feet here in the U.S.? The biggest reason is cost. Switching out all our cards and payment processing systems — things like ATMs, registers, vending machines, self-service kiosks, ticket terminals — will cost anywhere between $8 billion and $12 billion. Some serious sticker shock.

But it’s a worthy investment (and also worthy of fast-tracking) when you put that in context with how much we’re losing to fraud each year. According to a Nilson report, we lost over $5.3 billion to credit card fraud in 2013, up 14.5 percent since 2012. The switch to EMV will help curtail that number.

When will everyone have chip cards?

The shift to EMV is not going to happen overnight, but it’s moving along steadily. Chances are you’ve already gotten a chip card from your bank and seen some of your customers pay with them. Some data to illustrate the progression: In March of 2015, just 17 percent of cards swiped at businesses with Square Stand or Square Reader for contactless and chip had a credit card chip. By August 2015, that jumped to roughly 36 percent. In July 2016 the number of EMV cards processed through Square’s system was up to 71 percent and we expect it to be around 75 percent by the end of the year.

Given this adoption rate, it’s a good idea to prepare your business now — especially as more and more people come to recognize EMV as a more secure way to pay.

When will you need an EMV reader or terminal?

There’s no hard deadline to purchase a EMV reader or credit card machine, but it’s a good idea to get one soon to protect your business and be covered for the liability shift.

How can I accept EMV at my business?

To accept EMV at your business, you’ll need a new, EMV-enabled credit card reader. Chip cards are processed differently than magnetic-stripe cards. They’re dipped vertically (EMV chip part down) instead of swiped horizontally. We like to call it the “chip and dip.” So you’ll need a reader that’s set up with the technology to process them.

How do I use Square’s EMV reader?

Square’s EMV reader is easy to use and compatible with iOS and Android.

  1. Purchase the Square Reader for contactless and chip, which turns most smartphones or tablets into an EMV reader.
  2. Download the Square Point of Sale app for iOS or Android.
  3. Ring up your customer in the Square app.
  4. Insert your customer’s EMV-enabled card into the reader. Wait for all of the lights to flash from red to green when the transaction is successful. Square’s Reader for contactless and chip lets you know when you can remove the card.
  5. Receive your transfers as soon as the next business day. Square sends payments directly to your bank account in one to two business days.

What’s the difference between EMV vs. NFC?

EMV and NFC are often mentioned in the same conversations. That’s because they both represent the future of more secure, authenticated payments. However, they’re not interchangeable (a common mistake people make). EMV and NFC are actually entirely different technologies.

While EMV® (developed and managed by American Express, Discover, JCB, Mastercard, UnionPay, and Visa) is synonymous with chip card technology, NFC (which stands for “near field communication”) goes hand in hand with contactless, mobile payments. Basically, NFC is the technology that allows smartphones and other devices (like a payments reader) to communicate with each other when they’re close together. The devices have to be close, though (that’s the “near” part), usually around two inches or less.

Soon, NFC contactless payments (aka mobile payments) will begin to pick up steam. This means that more and more, people will start paying for things via their smartphones and watches. You can already see contactless payments in action at large retailers across the country — places like Walgreens, Whole Foods, and Home Depot, for example.

The progression towards contactless payments is natural. After all, our mobile devices are becoming like another limb. We increasingly look to our smartphones and watches to take care of daily life — relying on them for things like email, social media, and even health monitoring. So it makes sense that we’ll want to use our mobile devices to pay for stuff. (For one, it means you no longer have to carry around a wallet stuffed to the brim).

What’s more, contactless payments like Apple Pay are just as secure as EMV payments. They’re dynamically encrypted through something called tokenization, making them virtually impossible for fraudsters to hack. Apple Pay is also protected by Apple’s fingerprint technology (Touch ID). So even if you lose your phone, all your bank details are protected.

As we mentioned before, while EMV transactions are secure, they’re pretty slow. This will likely push people (and businesses) towards faster, more convenient payment technologies like NFC. This will be especially true once people realize they’re just as secure as chip cards.

We’ve seen this trend abroad — countries that have already adopted EMV as the standard have seen a faster acceleration of mobile payments adoption. So it’s worth getting yourself set up to accept both EMV and NFC at your business to stay current with how people will soon want to pay.

The Square Reader for contactless and chip accepts both EMV and NFC payments — so you can securely take any form of payment that comes across your countertop.

Learn more about Square payment processing fees and how they work.

The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.


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