Published by the Credit Union Association of New York

paymentsolutions
Getting ready for EMV
By Kimberly McCumber-Ploof, Chief Operating Officer, Covera
EMV CARDS. CHIP TECHNOLOGY. IF YOU FOLLOW THE
payments industry, you’re seeing these terms more and more
often. So what’s all the buzz about EMV card technology,
and what should your credit union be doing to prepare for
its move to the U.S.? Let’s take a closer look.
How EMV works
EMV cards (named for Europay MasterCard and Visa)
store payment information in a secure chip instead of a
magnetic stripe. They are not swiped like a magnetic stripe
card; instead, they’re inserted into a slot on the POS terminal.
A metal contact on the face of the card then connects the card
to the terminal, and the two devices are able to communicate.
Most EMV cards also have magnetic stripes for use at
terminals that haven’t been upgraded to EMV.
A dual interface EMV card, or a card capable of both
contact and contactless transactions, can be either tapped
at the POS terminal for a contactless transaction or inserted
into the EMV card reader for a contact based transaction.
Enhanced security
An EMV chip can store information, perform processing,
store secret information securely and perform cryptographic
processing. Unlike a magnetic stripe card, it is virtually
impossible to create a counterfeit EMV card that can be used
successfully. Smart Card Alliance describes the enhanced
security of EMV technology in four layers:
1. An EMV card’s security credentials are encoded by
the card issuer at personalization, stored securely in
the EMV card’s chip, and cannot be accessed by
unauthorized parties. Criminals have yet to find a
way to clone a chip! As a result, the cards help prevent
card skimming and card cloning, one of the common
ways magnetic stripe cards are compromised and
used for fraudulent activity.
2. An EMV transaction includes three components:
The card is authenticated; the cardholder is verified;
and the transaction includes dynamic data and is
authorized online or offline, according to issuerdetermined
risk parameters. As described above,
Begin educating
yourself and
preparing your staff.
each of these transaction security features helps to
prevent fraudulent transactions.
3. Every EMV transaction carries dynamic data, so if
a fraudster is able to steal account data from chip
transactions, the data can’t be used to create a
fraudulent transaction in an EMV or magnetic stripe
environment.
4. Because EMV cardholders use their cards and
individual readers to authenticate Internet transactions,
the technology can also prevent card-not-present
(CNP) fraud.
Coming (slowly) to the U.S.
Despite the security benefits, the United States chose not
to implement EMV when Europe, Canada, Latin America
and Asia initially began migrating toward the technology.
There are several reasons for our slow adoption, including:
• There are substantial costs associated with the
deployment of an EMV infrastructure.
• Chip cards are more expensive than magnetic stripe
cards.
• POS terminals require additional features to read the
card.
• Legacy back-office systems must be upgraded to
accommodate the technology.
But despite these “cons,” U.S. migration to chip technology
has become inevitable. As of Q3 2011, there were more than
1.34 billion EMV compliant chip-based payment cards in use
worldwide (EMVCo). U.S. travelers have faced rejection of
8 SEPTEMBER 2012 Connection