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On Black Friday 2013, 40 million Target customers nationwide had their credit card information compromised in one of the worst data breaches in this nation’s history. A year later, the United States is in the middle of a transition which aims to make such attacks, and credit card fraud in general, more difficult to pull off. Financial institutions are issuing credit cards which are using updated and more secure technology called EMV.
EMV is considered a global standard for credit card technologies and has been in use for quite some time in Europe and the rest of the world. ‘EMV’ is a relatively broad term and the technology itself has two major variations. The version of EMV being introduced in the United States will not always work in countries which predominantly use a different variation. This means that just because a credit card is outfitted with a new EMV chip, it won’t necessarily work abroad. This report aims to clarify what exactly EMV credit cards are and what is important for consumers to understand if they wish to use their card when travelling internationally.
What is EMV Technology?
EMV, which stands for Europay, MasterCard and Visa, is a global credit card technology standard widely used throughout Europe and the rest of the world. It is also referred to as “Chip and PIN” or “IC (Integrated Circuit) Credit” technology. Essentially, the major difference between EMV cards and the magnetic strip cards most US consumers are used to is the way in which the cards store personal information. Magnetic strip cards hold information in the strip itself. That is why every time you pay using this method, the magnetic strip needs to be swiped for the information on it to be read. Instead of a magnetic strip, EMV cards store information on an integrated circuit chip embedded into the card itself. These chips are much more difficult to forge or steal information from. This fact has been the chief motivating factor behind more and more countries adopting the new technology.
Thus far, the EMV rollout within the United States has been a slow process – many financial institutions offer few credit cards with this new technology. Even more difficult to find are stores which will accept EMV payments. This last fact is sure to change soon, however, due to financial institutions shifting the liability of fraudulent purchases on whichever party is least EMV-ready beginning October 2015.
Throughout the world, EMV credit cards are most often found in the “Chip and PIN” variety. This means that in addition to the IC chip, these credit cards require the cardholder to enter a personal identification number (PIN), whenever they make a transaction. In order to ease the EMV transition within the United States, EMV cards being offered today are “Chip and Signature”, meaning that they require a signature instead of a PIN. These cards will also still contain a magnetic strip, in order to allow consumers to make purchases at retailers who have not updated their equipment to support EMV transactions.
To find out more about how EMV technology originated, and how it protects consumers against credit card fraud, look to the “Brief History of EMV” section below.
What Impact Will EMV Technology Have?
Introduction of EMV credit cards will have very little impact on consumers who do not travel internationally. The type of EMV cards being rolled out in the US still contain magnetic strip technology, which means stores in the U.S. will be able to accept magnetic strip payments even after the October 2015 deadline. There is no incentive for consumers to upgrade to the new cards, unless they wish to better protect themselves against credit card fraud.
Consumers who travel overseas have a few things to consider, however. For those credit card users, upgrading is not as simple as signing up for an EMV card. Depending on the destination one travels to, most of the EMV cards issued in the United States might still cause issues when used abroad. Below we detail how consumers may feel the impact the EMV switch both in the US and when they travel around the world.
As mentioned above, beginning October 2015, retailers in America that do not accept EMV as a method of payment will be liable for fraudulent charges made at their store – shifting the blame away from the financial institutions. Once this shift occurs, it might happen that more and more stores which spent the money on the transition will be less likely to accept payments using non EMV cards – and if they do accept old payment methods, they are likely to be more careful not to accept a counterfeit or stolen card. Cardholders throughout the United States should make sure that their card is, or will be, updated with this new technology so that they are ready for the big shift in 2015. This is advisable not only because of the added convenience, but also for the added security offered by EMV technology.
Currently, a majority of banks which offer EMV credit cards do so for their “premium” cards – these are the cards which charge an annual fee. Financial institutions such as JP Morgan Chase, Barclays, Wells Fargo and US Bank only offer EMV cards which have an annual fee associated with them at the moment.
As the EMV technology becomes more widespread and accepted within the US, more cards with lower or no annual fees are sure to appear. According to a study by Aite Group, by the end of 2015, it is estimated that 70% of credit cards issued in the United States will have an EMV chip.
Credit card users who travel internationally, especially to Europe, need to understand a few things about using their credit cards overseas. Firstly, the EMV system has been in place abroad for a number of years. This means if you currently hold a card which does not possess EMV technology, using your credit card abroad might present an issue. Furthermore, when travelling abroad the type of EMV card you have plays an important role. The two major variations are Chip and PIN as well as Chip and Signature. Depending on which card you own, using your card in certain countries may be a hassle. Look to our “Chip and PIN vs Chip and Signature” section below to learn more.
For those consumers who need EMV-enabled cards now, due to having to travel internationally, below is a list of cards currently offered that support this technology. If there is no need to travel abroad, it is better to wait for more EMV-enabled credit cards to enter the market so that consumers have a greater pool of options to choose from.
Chip and PIN vs Chip and Signature
The most important factor when it comes to US-issued EMV cards and international travel is the authentication method. As mentioned above, EMV cards come in two varieties – “Chip and PIN” and “Chip and Signature”. Credit cards that rely on Chip and Signature authentication work much like old magnetic strip cards. After the card is put through a card reader, the cardholder must sign a receipt which is then matched against the signature on the back of the card. Chip and PIN credit cards require a 4 to 6 digit PIN once the card is swiped.
Out of all the EMV cards already offered by US institutions, only 6 support “Chip and PIN” technology. This presents a major problem to those traveling abroad as in most European nations (such as the United Kingdom, Ireland, and France), Chip and PIN is the most commonly accepted format.
Some consumers may think that their card being EMV-compatible means it will work in every country which supports EMV standards. That is not true. First, vendors may not have the appropriate equipment necessary for accepting Chip and Signature cards, rendering US Chip and Signature cards useless in such instances. Some unattended point-of-sale terminals (such as train stations) will only work with Chip and PIN cards. This can be frustrating, considering that consumers may have applied for a card specifically for the purpose of being able to use it abroad, only to find that their Chip and Signature card is of limited use in a country which uses Chip and PIN cards.
Chip and Signature credit cards are widely used in countries such as: Spain, Portugal, Italy, Germany, Turkey, and most of Southeast Asia. Chip and PIN cards, on the other hand, are most often found in: Canada, the UK, Ireland, France, Finland, the Netherlands, and most other European nations.
Below we outline EMV-ready credit cards and distinguish between those that use Chip and PIN or Chip and Signature authentication.
|Card||Chip and Signature||Chip and Pin|
|The Platinum Card® from American Express|
|The Business Platinum® Card from American Express OPEN|
|Gold Delta SkyMiles® Credit Card from American Express|
|Platinum Delta SkyMiles® Credit Card from American Express|
|Delta Reserve® Credit Card from American Express|
|Blue Cash Preferred® Card from American Express|
|Blue Cash Everyday® Card from American Express|
Bank of America
|Alaska Airlines Visa|
|Virgin Atlantic World Elite MasterCard|
|Asiana Airlines American Express|
|BankAmericard Travel Rewards|
|Norwegian Cruise Line World MasterCard|
|Royal Caribbean Visa Signature|
|AAA Member Rewards Visa|
|New Hawaiian Airlines World Elite MasterCard|
|New Hawaiian Airlines Business MasterCard|
|British Airways Visa Signature|
|Chase Marriott Rewards|
|Marriot Rewards Premier|
|Ritz Carlton Rewards|
|Chase Sapphire Preferred® Card|
|Citi® Hilton HHonors™ Reserve Card|
|Citi® Hilton HHonors™ Visa Signature® Card|
|Citi® / AAdvantage® Platinum Select® World Elite™ Mastercard®|
|Citi® / AAdvantage® Executive World Elite™ Mastercard®|
|Citi® / AAdvantage® Gold World Elite™ Mastercard®|
|Citi Prestige® Card|
|Citi ThankYou® Premier Card|
|Citi ThankYou® Preferred Card|
|Citi® Diamond Preferred® Card|
|Platinum World MasterCard|
|FlexPerks Travel Rewards|
|Korean Air SkyPass Visa Signature|
|Korean Air SkyPass Visa Classic|
How Much Will The EMV Transition Cost Businesses?
Some major retailers in the United States have already began the transition to accept EMV card payments. Most experts agree, however, that small businesses are far from ready. The switch can be an expensive one. The average cost of EMV-compliant point-of-sale terminals is $450. Further costs, which are harder to estimate, are things like the training of staff to use the new card readers. EMV chip technology requires customers to insert their card into the reader, not simply swipe a magnetic strip as has been the case with debit and credit cards in the past. Stores whose payment terminals are tied to computer software may also require additional costs to update.
Possibly the biggest cost to businesses comes from the liability shift mentioned above. Beginning October 2015, if a store, which does not support EMV technology, accepts a fraudulent payment for a good or service, the credit card company will withdraw the payment, and the business will bear the damages.
The switch to EMV also comes with some incentives associated with it. Credit card brands such as Visa and MasterCard offer relief to businesses which make the switch over to the smart-chip based technology. For a comprehensive list of benefits and incentives look to the table below.
|October 2012||Merchants for whom 75% of their Visa transactions are made through EMV technology cards will have annual PCI validation requirements eliminated.|
|October 2013||50% Relief from Account Data Compromise (ADC) to merchants which have 75% of their MasterCard transactions going through EMV point of sale (POS) terminals.|
|October 2015||By October 2015, the same benefit extends to 100% relief from ADC, if 95% of MasterCard transactions originate from EMV POS terminals.|
|October 2013||Relief from PCI Data Security Standard (DSS) reporting requirements for merchants for whom 75% of their American Express transactions originate from EMV compliant POS terminals.|
|October 2013||PCI audit waivers for merchants who have 75% of their Discover transactions going through EMV POS terminals.|
A Brief History of EMV
With advances in technology, credit card theft grew to be a major concern. Magnetic strip cards became especially vulnerable over the last few years. Small devices could be used to quickly swipe a credit card, copy all the information on it and use that to create a counterfeit copy. These devices began popping up everywhere - public ATMs, restaurants, and even subway or metro stations. While all of this was happening, banks were suffering losses. All fraudulent charges were covered by the card issuer, since laws protected consumers from liability.
As a result, more credit card companies around the world began to switch their cards to the EMV standard. Instead of storing personal information on a magnetic strip, EMV-compatible cards hold all valuable data on an IC chip. This data is encrypted and always changing, making it signficantly more difficult to counterfeit.
The benefits of EMV standards spread like wildfire. According to data from EMV Connection, as of December 2013, 99.9% of point-of-sale terminals in Europe use EMV. Additionally, over 70% of terminals in Asia, Africa, the Middle East, Canada, and Latin America also conform to the EMV standard.