Fundamentals of EMV smartcard technology for FIs

Jan. 10, 2013 | by Jim Ghiglieri

Undoubtedly you've heard a lot of talk about EMV — some of the conversation happening on this very blog. Yet as I travel the country talking with community banks and credit unions, there exists quite a bit of confusion, mostly around the basics of EMV — what it is, why the U.S. is working toward implementing it, and how it's predicted to help limit fraud losses and potentially improve portfolio profitability.

For this reason, I put together a brief article on the fundamentals and welcome you to share it with staff, managers, your board … anyone who could use a primer on smartcard technology. Below is a brief excerpt; the full article is available for free download.

As we all know, the magnetic stripe currently used on debit and credit cards is vulnerable to fraudsters. Card data is easily compromised by thieves outfitted with inexpensive equipment, such as card duplication gear, Internet-sourced card data, and magnetic stripe readers. That combined with weak signature-based authentication, has resulted in an outbreak of counterfeit fraud, costing FIs, merchants, card issuers, and consumers millions of dollars.

Smartcard (EMV) technology has reduced fraud losses in markets across the globe. By replacing the current unencrypted magnetic stripe with a chip embedded in the card, smartcard technology adds dynamic data to the transaction process, making it far less vulnerable to fraudsters. Every EMV card is essentially a small, secure computer, making it nearly impossible to counterfeit. While EMV cards are the same size and thickness as a standard magnetic stripe card, they are inserted into a slot on the point of sale terminal (POS), rather than being swiped through a reader.

Currently, FIs can deploy EMV cards using either PIN or signature as the cardholder verification method. EMV cards can be utilized in either an "online"or "offline" mode.

EMV technology is currently in play globally, with more than 1.3 billion EMV cards in circulation and 15.4 million EMV POS terminals in use. One hundred percent EMV deployment in the U.S., which is the largest card and terminal market, is expected to take a decade or longer.

Nationwide, EMV implementation will cost billions of dollars, and the fraud benefits are only realized years after all the necessary players make the investment. U.S. merchants must install new security hardware and software in more than 10 million POS terminals. The total cost of this upgrade will range from $2.4 to $2.6 billion. The cost of ATM upgrades is an estimated $310 million or more.

Download the full article at 

Topics: EMV , Security

Jim Ghiglieri / Jim leads Shazam’s communication efforts by working directly with industry organizations, trade associations, and media outlets to affirm Shazam’s focus on representing the voice of community financial institutions in the electronic payments industry.
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