KEY FACTS ABOUT EMVEMV (“Europay International, MasterCard, and Visa”) is a set of standards for interactions between chip cards and point-of-sale (POS) devices. Essentially, EMV, chip cards, and smart cards all mean the same thing. EMV helps prevent payment card fraud via an additional layer of security provided by an embedded microchip. Many regions across the globe have already implemented EMV, including Europe, Canada, Latin America, and Asia. The United States is now actively taking steps to support EMV, and is one of the last major countries to do so.

The Key ComponentsThe Chip CardA chip card or smart card is simply a regular credit or debit card with the addition of an embedded microchip. The microchip provides capabilities not found in regular magnetic stripe cards, including two-way communication with the EMV-capable terminal.

The EMV-Capable TerminalEMV-capable terminals have a slot on the top or bottom where the chip card is inserted or “dipped” into the terminal. However, in order to process EMV transactions, the software application on the terminal must be certified by the processor to support EMV. In other words, just because a terminal has a card slot on the front does not mean it is ready to take EMV cards.

A way to PREVENT CARD-PRESENT FRAUD via the additional security provided by a microchip embedded on the card

A SET OF STANDARDSfor interactions between chip cards and point-of-sale (POS) devices

Europay International,

MasterCard, and

VisaCHIP

CARDSSMARTCARDSEMV

WORLD USAGEEuropeCanadaAustraliaLatin AmericaAsia

■ Now actively working to support EMV■ One of the last major countries to make the transition

THE

U.S.

WHAT IS EMV?

Chip cards are virtually impossible to clone by counterfeiters and other criminals. The chip on the card generates a unique cryptogram for every single transaction in order to verify that it is being made with a valid card. The chip also stores personalized security credentials that cannot be accessed without authorization.

EMV fraud prevention is only effective, however, in a card-present environment. In card-not-present transactions (online or via phone), the chip on the card is not read and the transaction does not have that extra layer of protection.EMV fraud protection

is only effective in a card-present environment. Card-not-present transactions (online or via phone) do not have this added layer of protection.

KEY FACTS ABOUT EMV

How EMV Prevents Fraud

EMV cards can also be used for contactless payments at a terminal equipped with near-field communication (NFC) technology. The chip card – or a smartphone with a mobile-payment app like Apple Pay – is passed close to or tapped on a contactless terminal and the relevant information is immediately transferred. Many experts predict that, with the prevalence of upgraded processing equipment, the transition to EMV will also increase mobile and contactless payments. This will most likely be seen at merchants who value fast transactions, such as quick-service restaurants, transportation companies, and transit agencies.

It is important to note, however, that EMV and contactless payments are two different things: EMV is a fraud prevention/security process using chip cards while contactless payments are simply another method of exchanging data with a terminal. This means an EMV transaction can also be contactless, but not all contactless transactions are EMV. Many terminals that support EMV also support contactless payments, so a merchant can get both benefits when they upgrade their POS equipment.

EMV and contactless payments are not the same thing. EMV helps prevent fraud via a chip in the card whereas contactless payments are a method of exchanging data between a card or a smartphone with a mobile payment app and a terminal.

EMV and Contactless Payments

Rising counterfeit card fraud is a key reason why U.S. card issuers, payment processors, and merchants are making the switch to EMV. From 2007 to 2014, credit card fraud rates doubled to 10 basis points, which translates to 10 cents out of every $100 transacted.

Adds an Additional Layer of Security to Prevent FraudThe embedded microchip is virtually impossible to duplicate (or counterfeit) so criminals find EMV cards less attractive to steal and clone.

Reduces Fraud Costs to Card Issuers, Payment Processors, and MerchantsEMV helps protect merchants from the liability associated with card-present fraud. On October 1, 2015, the liability for fraud costs shifts to merchants who do not have EMV-capable equipment. This means that if a chip card is used at a traditional magnetic stripe-only terminal to make a counterfeit purchase the merchant will be responsible for the chargeback because the merchant does not have an EMV-capable terminal.

Helps Merchants Accept New Payment Technologies with EMV-Capable EquipmentEMV terminals usually include readers for contactless payments, such as mobile payments made via apps (e.g., Apple Pay). This can help merchants keep pace with consumers’ shifting payment preferences and demands for new payment technologies.

Creates a Common Cardholder ExperienceWith more and more U.S. citizens using chip cards and merchants accepting chip cards, U.S. and international travelers will now have a common cardholder experience. International visitors will appreciate the additional security when making purchases in the U.S., and U.S. travelers will find it easier to make purchases in Europe, Canada, Latin America, and Asia.

RISING COUNTERFEIT CARD FRAUD2007-2014credit card FRAUD rates DOUBLED to 10 basis points

10 centsout of every $100 transacted

Source: Aite Group, EMV: Lessons Learned and the U.S. Outlook; June 2014

Benefits of EMV

KEY FACTS ABOUT EMV

AT A GLANCE: U.S. EMV TRANSITION TIMELINE

APRIL 2013Merchant acquirers/

card processors upgrade systems

OCTOBER 2016Liability shift for

fraud at ATMs, and for lost or stolen cards

OCTOBER 2017Liability shift for

fraud using magnetic stripe cards at fuel

pump terminals

OCTOBER 2015Liability shift for

POS/card-present fraud using magnetic

stripe cards

For most merchants, starting in October 2015 card-present fraud liability shifts to the party with the least secure technology. So, if a merchant does not have an EMV-enabled terminal or POS equipment, it will most likely be held responsible for some or all of the costs associated with any fraudulent in-person purchase.

MERCHANT PAYS THE COST for fraudulent POS/in-person purchases

card-present

FRAUD LIABILITY SHIFTS to least secure party

NOEMVacceptance

KEY FACTS ABOUT EMV

What this Means for Merchants

Need More Information? If you’d like to learn more about EMV and the impact it will have on your business, contact us at sales@clearent.com or 866.205.4721.

linkedin.com/company/Clearent

twitter.com/GoClearent

facebook.com/GoClearent

youtube.com/user/GoClearent

© 2015 Clearent, LLC, a Member Service Provider for Central Bank of St. Louis. clearent.com

WANT MORE INFORMATION ABOUT EMV?Contact us at sales@clearent.com or visit clearent.com/emv to download these additional resources on EMV.

FIVE MYTHS ABOUT EMVHOW TO PROCESS EMV TRANSACTIONSEMV ADOPTION GUIDE FOR MERCHANTS