Europay, mastercard, and visa emv

Europay, Mastercard, and Visa EMV: Definition, Example, and FAQs

Europay, Mastercard, and Visa EMV, commonly referred to as EMV, is a global technical standard for smart payment cards and the terminals and automated teller machines (ATMs) that accept them. This standard, a cornerstone of modern payment systems, employs integrated circuit chips to enhance data security and reduce fraud in card-present transactions. EMV technology is primarily characterized by the small metallic chip embedded in credit cards and debit cards, which facilitates secure transaction processing by generating unique transaction data for each purchase.

History and Origin

The origins of EMV technology can be traced back to the 1990s in Europe, driven by a need to combat the increasing issue of magnetic stripe card fraud. Europay, MasterCard, and Visa, as prominent payment networks, collaborated to develop a common set of specifications for chip-based payment cards and acceptance devices. This collaboration aimed to create a globally interoperable standard that would make card payments safer and reduce the financial burden of fraud. In 1999, EMVCo was formed by these three companies to maintain and evolve the EMV Specifications, ensuring continued interoperability and security enhancements worldwide.²⁶,²⁵

While EMV technology gained widespread adoption internationally throughout the late 1990s and early 2000s, its implementation in the United States lagged. To accelerate the transition and combat rising counterfeit card fraud, U.S. credit card issuers like Mastercard, Visa, Discover, and American Express introduced a liability shift policy. Effective October 1, 2015, this policy transferred the financial responsibility for counterfeit card fraud from the card-issuing bank to the merchant, if either party had not adopted EMV-compliant technology.²⁴,²³ This significant change incentivized merchants to upgrade their point-of-sale (POS) systems, dramatically increasing EMV adoption across the country.²²

Key Takeaways

• EMV is a global standard for secure payment transactions using integrated circuit chips on payment cards.
• It significantly enhances security by generating a unique transaction cryptogram for each purchase, making card data far more difficult to counterfeit or reuse.
• The standard was developed by Europay, Mastercard, and Visa, and is now managed by EMVCo, a consortium that includes other major payment networks.
• The EMV liability shift in the U.S. in 2015 incentivized merchants to adopt EMV-compliant systems to avoid financial responsibility for counterfeit fraud.
• EMV technology supports both contact ("chip and PIN" or "chip and signature") and contactless payment methods.

Interpreting the EMV Standard

The EMV standard outlines the technical specifications for the interaction between an EMV chip card and a payment terminal during a transaction. At its core, EMV ensures that each transaction is unique and highly secure through a process called dynamic data authentication. Unlike older magnetic stripe cards that store static data, an EMV chip card performs cryptographic calculations with the terminal, generating a one-time use code or cryptogram for each transaction. This dynamic data makes it extremely difficult for fraudsters to create counterfeit cards from intercepted transaction data.²¹,²⁰

For a transaction to be successful, the EMV chip and the terminal communicate to verify the card's authenticity and the cardholder's identity. This verification can involve a Personal Identification Number (PIN) or a signature, depending on the card issuer's preference and regional practices. The secure communication between the chip and the terminal, along with the dynamic data, provides a robust defense against card fraud.

Hypothetical Example

Consider a consumer, Sarah, using her EMV chip credit card to pay for groceries at a supermarket.

1. Initiation: Sarah inserts her EMV chip card into the POS terminal. The terminal detects the card's presence and initiates communication with the chip.
2. Authentication and Data Exchange: The EMV chip and the terminal perform a handshake, exchanging encrypted data. The chip generates a unique cryptogram for this specific transaction. This cryptogram is a one-time code that validates the transaction and the card's authenticity.
3. Cardholder Verification: The terminal prompts Sarah to enter her PIN. Sarah enters her PIN, which is verified by the chip (either offline or online with the issuing bank).
4. Authorization Request: Once the chip and PIN are successfully authenticated, the terminal sends the transaction details, including the unique cryptogram, to the payment processor and then to Sarah's card-issuing bank via the payment network.
5. Authorization Response: The bank verifies the cryptogram and approves the transaction, sending an authorization back to the terminal.
6. Completion: The terminal displays an approval message, prints a receipt, and Sarah removes her card. Because of the unique cryptogram generated by the EMV chip, even if a criminal were to intercept the transaction data, it would be useless for creating a counterfeit card or making another fraudulent purchase.

Practical Applications

EMV technology is fundamental to modern card-present payments, offering enhanced fraud prevention across various sectors. Its primary application is in securing transactions made with physical cards at retail locations, gas stations, and ATMs. The dynamic data generated by EMV chips helps to thwart card cloning and counterfeit card fraud, which were significant vulnerabilities with traditional magnetic stripe cards.¹⁹,¹⁸

Beyond standard credit and debit card transactions, EMV principles extend to:

• Contactless Payments: Many EMV cards now incorporate Near Field Communication (NFC) technology, allowing for "tap-to-pay" transactions where the card or mobile device is simply waved near a compatible terminal. This builds on EMV's secure chip technology for added convenience.¹⁷
• Mobile Payments: Digital wallets like Apple Pay and Google Pay often leverage EMV tokenization and secure elements within smartphones to facilitate secure transactions, applying EMV standards in a virtualized environment.
• Automated Fuel Dispensers (AFDs) and ATMs: These unattended payment terminals were given an extended deadline for EMV compliance due to the complexity of upgrading their systems. The EMV liability shift also applied to these, encouraging their modernization to protect against fraud.¹⁶

The widespread adoption of EMV has notably reduced in-person counterfeit fraud. For example, U.S. merchants who transitioned to EMV technology saw counterfeit fraud plummet 87 percent between September 2015 and March 2019.¹⁵

Limitations and Criticisms

While EMV technology has significantly improved security for card-present transactions, it is not without limitations. A primary criticism is that EMV primarily addresses counterfeit card fraud, but it does not fully protect against all types of fraud, particularly card-not-present fraud (CNP) which occurs online or over the phone. As in-person fraud has decreased due to EMV, criminals have increasingly shifted their focus to CNP fraud.¹⁴

Another point of concern has been the initial cost and complexity of EMV adoption for merchants, particularly small businesses, requiring investments in new POS terminals and system upgrades.¹³ Additionally, some users have found "dipping" an EMV card slower than swiping a magnetic stripe card, leading to minor inconveniences at checkout.¹²

It is also crucial to understand that EMV compliance and Payment Card Industry Data Security Standard (PCI DSS) compliance are distinct. While both aim to enhance payment security, EMV focuses on securing the card transaction itself, while PCI DSS establishes a set of comprehensive security guidelines for all entities that store, process, or transmit cardholder data. An EMV implementation does not automatically satisfy all PCI DSS requirements, and both standards are necessary for a robust security posture.¹¹,¹⁰

EMV vs. Magnetic Stripe

The fundamental difference between EMV chip cards and traditional magnetic stripe cards lies in how they store and transmit payment data, and consequently, their security levels.

Magnetic stripe technology, developed in the 1960s, stores static cardholder information that, once stolen, can be easily duplicated onto counterfeit cards.⁹ EMV technology, conversely, generates a unique, single-use cryptogram for each transaction, making it exponentially more difficult for fraudsters to clone cards or reuse stolen data.⁸ This dynamic data significantly enhances security, though the physical act of inserting or tapping an EMV card might take a few seconds longer than a quick swipe.⁷

FAQs

What does EMV stand for?

EMV stands for Europay, Mastercard, and Visa, the three companies that initially developed the technical specifications for chip payment cards. The standard is now managed by EMVCo, an international technical body that oversees its evolution.⁶

How does an EMV transaction work?

When an EMV chip card is inserted into or tapped on a compatible terminal, the chip and terminal communicate to authenticate the card and generate a unique, encrypted code (cryptogram) for that specific transaction. This code is then sent to the card issuer for authorization. The process enhances card security by making each transaction unique and virtually impossible to duplicate.⁵,⁴

Why did EMV cards become common in the U.S.?

EMV cards became widespread in the U.S. largely due to the liability shift introduced in October 2015. This policy shifted the financial burden of counterfeit card fraud from card issuers to merchants if either party hadn't adopted EMV-compliant technology, strongly incentivizing upgrades.³,²

Do EMV cards prevent all types of credit card fraud?

No, EMV cards are primarily designed to prevent card-present counterfeit fraud by making it nearly impossible to clone a physical card. They offer less protection against card-not-present fraud, such as online or telephone scams, where the physical chip is not used. Other security measures like tokenization and 3D Secure are used to combat CNP fraud.,¹