Editor’s note: This is the first is a series of blog posts that will address the questions of Why, When, Who, What and How as they relate to the EMV chip card migration in the United States. Tweet using the hashtag #AskOT if you have questions for our experts. Or submit your question to Ask OT here.
When students assembled in the lecture hall for their philosophy final, the instructor wrote a single one-word question on the board: “Why?” The star of the class needed less than a minute to dash off an essay in response, earning an A by simply writing, “Why not?” Luckily, the reasons for introducing EMV in the United States aren’t nearly so fuzzy.
Simply stated, EMV can help stem the rising tide of credit card fraud. It can thwart thieves who steal cards, infiltrate card databases, use skimmers to intercept card numbers on ATMs or in restaurant backrooms, employ key loggers that record key strokes on computer keyboards, and use skimmers and pinhole cameras to photograph card numbers and PINs.
Physical security features that once protected the magnetic stripe cards commonly used in the U.S. no longer do the job. Thieves long ago figured out how to read the data held in the stripe and can reproduce it with inexpensive and easily available technology. They also learned how to reproduce the intricate holograms that once assured merchants of a card’s authenticity.
As one of the founders of EMV, I can attest that the original goal was to establish a global standard and allow each economy or market to use this global standard to upgrade their cards once they decided the magnetic stripe had effectively reached the end of its life.
The founding team built EMV on ISO7810, ISO7811, ISO7813, ISO7816, ISO8583, ISO20022, ISO14443 and others – all international standards that underpin the payments world. (We will discuss these standards in a later blog.) The team made it our goal to create a standard that could support credit and debit cards everywhere in the world, and they first published it in 1994.
Since then, countries around the world have been switching to the EMV standard. In the United Kingdom, for example, liability for fraudulent transactions shifted from the card schemes (payment networks) to retailers in 2005. Liability shifts began occurring in Africa in 2006, and the shifts were completed for all point of sale transactions there by 2010. Asia-Pacific followed a timeline similar to Africa’s, except for domestic transactions in Japan and China.
With the United States now on the road to adopt EMV, global interoperability can once again be guaranteed. International travelers will once again be comfortable using their card here in the United States with the same level of security they receive domestically. EMV enabled Merchants around the world, who have been worrying about accepting American magnetic stripe cards, will finally be able to accept American payment cards without concern.
A dream that started late 1993 in a conference room at the Hilton O’Hare airport when the founders — Europay International, MasterCard International and Visa International — agreed to work together to produce a common specification capable of replacing the magnetic stripe on all payments cards, is now becoming reality for much of the world as the U.S. migrates to EMV.
In that conference room an agreement founded on four principles was forged.
1) Address the challenge of Counterfeit by using cryptography to create a digital Card Authentication Method or CAM
2) Prevent lost and stolen fraud by supporting PIN verification at the Point of sale without demanding 100% online authorization
3) Introduce issuer control of the approval of a transaction and continue to offer the merchant a guarantee of payment without imposing the expense of
100% online authorization
4) Introduce a technology that could offer revenue opportunities by easily allowing Issuers to provide value-added services such as:
–The support of loyalty and rewards programs
–The introduction of electronic cash replacement techniques
–A mechanism to assure digital authentication of identity
–A platform to consolidate many cards onto one bank-issued card
They agreed to accomplish all of that by developing a specification to secure the world of credit and debit card payments through the use of the Integrated Circuit Card or ICC, which is also known as the chip card.
Thus, the next time you are out to dinner with a friend and you take out your new EMV chip card, you will be able to answer the question of “Hey, why do you have what looks like a computer chip on your card?” We hope your answer will not just be “Why not?”
Philip Andreae, Vice President, Field Marketing, Payment, North America at Oberthur Technologies
At Oberthur Technologies, Philip Andreae, Vice President, Field Marketing, Financial Services Institutions, North America, provides clients an in-depth understanding of EMV and what it takes to introduce EMV in the U.S. Over the last 20-plus years, Philip has been actively involved in the payment industry including driving the creation of the consortium that developed the EMV specification.