How credit cards with EMV chip work - The Nilson Report · EMV chip. The use of Offline pin is...
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HOT TOPICS 29 MINS AGO | UNITED AIRLINES CEO OSCAR MUNOZ ON GEOPOLITICAL HOME BUSINESS GUIDES How credit cards with EMV (chip) work POSTED BY: BRENDAN BYRNE 1 DAY AGO The credit card has fast evolved over the years to replace the traditional mode of payment. With its increased acceptability and the convenience it offers, it is not surprising that nowadays a preponderant number of people use a credit card of different types and functions. Sometimes users are attracted to the travel rewards credit card that offers its users redeemable points, miles that can be used to reduce the cost of an airfare payment, or even the option to drive down debt with credit cards specifically for balance transfer. ○ " ○ # ○ $ FRONTPAGE LATEST NEWS TOP STORIES BUSINESS TECHNOLOGY POLITICS VALUE INVESTING PREMIUM SEARCH …
Transcript of How credit cards with EMV chip work - The Nilson Report · EMV chip. The use of Offline pin is...
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How credit cards with EMV(chip) workPOSTED BY: BRENDAN BYRNE 1 DAY AGO
The credit card has fast evolved over the years toreplace the traditional mode of payment. With itsincreased acceptability and the convenience it offers, itis not surprising that nowadays a preponderant numberof people use a credit card of different types andfunctions. Sometimes users are attracted to the travelrewards credit card that offers its users redeemablepoints, miles that can be used to reduce the cost of anairfare payment, or even the option to drive down debtwith credit cards specifically for balance transfer.
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Irrespective of what kind user you are, whether you area lackadaisical user who only remembers that he has acredit card when he stumbles on it or the kind of userwith more credit cards than you can count, your issuerhas definitely made sure that by now all your validcredit cards have the EMV (chip) technology. Just likethe old ones they replaced, this new one still has theMagstrips ensuring that they are compatible with oldercard readers. Card issuers and Tech enthusiastsbelieve that chip cards payment technology have cometo stay. HOW TO [GUIDES]
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One of the reasons why the issuers switched from theold, magstripe only credit cards was because the issuerswere constantly outmatched by cybercriminals. In 2013,hackers stole 45 million dollars, due to breaches withbankcards. Hackers seemed more sophisticated andequipped than the card issuers. This led to a series ofbrazen hacking attacks resulting in untold mental painfor the regular Joes and Janes caught up in the turmoil. Card issuers have to constantly work to eliminate databreaches as incentives to steal financial information arepowerful.
Due to the economic strength of the United States, thecountry has become a preferred target for hackersseeking to get some financial benefit or make astatement for their cause. According to the NilsonReport credit card fraud reached $16.31 billion in 2014,and the U.S. accounted for 48.2% or $7.86 billion ofgross card fraud worldwide. The lack of EMV-compliantinfrastructure was blamed for this staggering figure.
The EMV is an abbreviation for “Europay, MasterCard,and Visa”. The named was culled out of the credit cardnetworks that spearheaded the development of thisprotocol. An impartial consortium was formed; themembers consisted of those three that developed theprotocol, joined by China UnionPay and JCB. The nameof the consortium is EMVco, they facilitate a worldwideacceptance of secure payment transactions andinteroperability of secure payment transactionworldwide. The consortium also evolves the EMV chipspecifications and related testing processes, but doesnot in any way enforce EMV compliance within a
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marketplace which is the responsibility of the market-place regulatory body. The EMV card is now a widelyaccepted technology for securing payment cards.
How EMV card technology worksThe difference in the EMV chip transaction andmagnetic stripe is basically in how it functions. Thetraditional magnetic stripe is a data store whichcontains information that can be used just once when itis read by the terminal, it becomes just an ordinaryplastic and should be discarded while the EMV chip ismore of an intelligent chip. The EMV chip processesinformation and can determine the outcome oftransactions based on pre-determined rules by the cardissuer. The EMV chip enforces rules like offline dataauthentication, online authorization, verifying theidentity of the cardholder by pin and any otherverification that the issuer deems necessary. Theinformation in the EMV chips are dynamic and canchange with every transaction, those with magneticstripe cards don’t have that luxury as the informationon the magnetic stripe were static, once in it, it can’t bechanged. The interaction between the chip and theterminal seem short but many processes occur withinthat short time. Every new transaction you initiateproduce a unique code (usually called token) with aprinciple called cryptography, this principle is verysimilar to the complex mathematical design used forcryptocurrency, the introduction of cryptography tofinancial technology brought a great deal of safety tofinance, to learn more about cryptography, click here.The token code generated is unique to that transactionand it is ensured that no two transaction codes are everthe same, past, present or future.
For every transaction initiated by EMV, a two-key tripleDES cryptography will generate an applicationcryptogram. The cryptogram generated for online
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authorization request in called Authorisation RequestCryptogram (ARQC), when the transaction is declined,the cryptogram generated is known as ApplicationAuthentication Cryptogram (AAC). The cryptogramgenerated by signing data elements when the paymentis approved for clearing and settlement is called aTransaction Certificate (TC).
Authorization controls and riskmanagementThe EMV chips are designed by card issuers to give somedegree of controls to the issuing bank. The chiptransaction gives banks point of sales controls, so as toreduce the level of exposure to fraud for the cardholder.Banks can set limits that cap the number of consecutiveoffline transactions that may be processed. In somecountries, banks limit the volume of transaction thatcan be done in a 24 hour period, any transaction youwish to process that is above that cap will require you tocontact your financial institution. Depending on thepreserved risk of exposure, the financial institution canissue a script commands that limits the amount ofmoney that be withdrawn to zero. They can also issuescripts to block or disable a card based on terms andagreement.
This measure helps to reduce the loss of funds in theevent of a stolen or lost card.
Cardholder VerificationThe EMV chip built on the successes of the magneticstripe only card verification system, its failures werestudied and modified, new features were also added. Thetwo new features that were introduced gave issuers theresponsibility and flexibility in determining andenforcing methods for verifying cardholders.
The two features are
Cardholder verification method (CVM) ListOffline Pin
CVM List: The CVM list allows issuers to determine thecardholder verification methods and the order ofpriority to be used for specific acceptance conditions,thus allowing the terminal to carry out cardholderverification if it supports the feature. And if it doesn’t, itprovides an alternative.
CVM offline PIN: A cardholder can verify a pin enteredinto the terminal PIN pad offline, this method dual-pinverification is quite new as it was launched with theEMV chip. The use of Offline pin is entirely optional tothe issuer.
Without any doubt, card issuers migrating to EMV Stripsis a smart move, as EMV has significantly reduced card-present fraud in the world, little wonder the gradualacceptance of this technology, based on EMVco Reportfor Q4 of 2018, 73.6% of the world transaction are viaEMV.
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