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EMV Chip Card Readers: A Complete Guide

EMV Chip Card Readers: A Complete Guide
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Go ahead, open your wallet. Chances are that your credit and debit cards feature a square “chip” on the front that gets inserted into an EMV Card Reader to make a payment. It may also have a symbol that resembles a “signal” that is “tapped” on an EMV Card Reader to make a payment. And it likely still has a magnetic strip on the back that is swiped through a payment terminal that is not equipped to read EMV chip cards. 

This article will take a closer look at everything there is to know about EMV technology and what to look for when evaluating EMV Chip Card readers.

What Is an EMV Chip Card?

An EMV card—also referred to as a “chip card” or a “smart card”—features a secure, embedded integrated circuit chip (ICC) on the front that has the ability to read and write information to the chip and validate authenticity. The chip stores encrypted data that is more secure than mag-stripe data. EMV chip cards usually contain a mag-stripe on the back.

EMV chip cards are secure and protect against certain types of fraud. Unlike data on a static mag-stripe card that can be copied (“skimmed”) to create a cloned card, chip technology combats counterfeiting by assigning a dynamic value for each transaction. When an EMV chip card is used at an EMV payment terminal, the chip produces a one-time use code for each transaction. If this information is accessed in a data security breach, it cannot be used to process additional transactions or create a counterfeit card.

EMV® was originally established in 1994 by three leading card brands: Europay, Mastercard and Visa (hence “EMV”).  It is now governed by EMVCo, whose primary purpose is to manage and evolve EMV specifications and supporting testing programs that enable card-based payment products to work together seamlessly and securely worldwide. EMV dictates the interaction between a smart (chip) “card” and a POS payment device. It protects against in-person counterfeit card transactions.

There are now more than 1 billion EMV cards in circulation in the U.S. and 77% of card transactions made in person are conducted with an EMV card and an EMV terminal.

How Does an EMV Chip Card Work?

EMV chip cards are processed differently than mag-stripe cards. Mag-stripe transactions go one way only. The card is swiped and the information contained on the magnetic strip is sent for authorization. With EMV, the card is inserted into an EMV slot on a payment device and it shares information with the reader that proves that the card is valid.

EMV chips contain an embedded microchip that generates a unique code, called a “token” for each transaction. This single-use token cannot be used for a future transaction, so this protects against fraudsters intercepting a transaction initiated with a chip card. 

Many EMV chips also contain NFC contactless technology that allows two devices—like your phone and a payment terminal—to talk to each other when they’re very close, typically within two inches. NFC uses a tiny microchip and radio antenna to conduct the tap-and-go experience. In order for NFC contactless payments to work, both the payment terminal and the payment vehicle (i.e. card, phone) must be enabled with NFC technology. Visa reports that there are more than 175 million EMV contactless cards in the U.S. 

Sometimes an EMV device will prompt for a PIN, and sometimes the clerk will need to get a signature. The bank that issued the card sets the rules and the chip tells the payment device which method to use. 

And if an EMV chip card is swiped through an EMV terminal’s mag-stripe reader, the consumer will be prompted to insert it in the chip slot to proceed with the transaction.

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How EMV Terminals Can Process Faster Payments

The very thing that makes chip cards more secure can also slow some chip transactions down. One of the problems with some EMV terminals is that they require the EMV chip card to be inserted in the card reader where it remains throughout the transaction, which can take as long as 15 seconds. 

To address this, the card brands introduced EMV Quick Chip (or M-chip) technology that allows the card to be inserted and removed at any point during a payment transaction. 

Some EMV Card Readers—such as PayJunction’s ZeroTouch Terminal—connect to the cloud, so cardholder data is never stored on the device. This shrinks the amount of time required to process a chip transaction down to just a couple of seconds, typically four times faster than older EMV terminals. 

Here are seven traits to look for when considering an upgrade to an EMV credit card reader.

What is the EMV Liability Shift?

To stem the tide of fraud and propel the rollout of EMV cards and devices in the U.S, the card brands introduced carrots and sticks for both card issuers and merchants. One of the most compelling incentives took effect in October 2015. Known as the “Liability Shift,” it punishes the “least-secure” entity that is not able to process EMV chip cards. A new chargeback type was even introduced related to in-person counterfeit card transactions. 

In the old mag-stripe world, the financial responsibility to cover counterfeit card transactions was the responsibility of the bank, and merchants most likely didn’t even know they occurred.

Now, a merchant is liable for counterfeit card fraud that occurs if a consumer presents a chip card and the payment device can only read magnetic stripe cards. This means that if a criminal presents a stolen or counterfeit EMV card to make a purchase, and the merchant swipes the card to process the transaction, the merchant will incur the cost for the full transaction amount.  

Businesses that have an EMV card reader are not responsible for the fraud charges stemming from counterfeit card transactions.

Does Your Business Need an EMV Chip Card Reader?

EMV chip card transactions only apply to payments made in person, not those made online or through recurring/subscription payments. If at least 80% of your payments are made in person, you should make sure that you have an EMV payment terminal. This protects your business from fraud and chargebacks. It also builds customer trust by showing that you’re keeping up with the latest technology.

There is no mandate that merchants accept EMV transactions. You can continue to swipe cards through a mag-stripe payment terminal, or even manually key them into a terminal or other software or systems in your business. However, you are putting your business at risk in the event that a fraudster takes advantage of your lack of EMV-reading technology.

If you’re a larger business, or you sell goods or services with a high average ticket, you really should get an EMV card reader. The terminals aren’t that expensive, and the cost of just one fraudulent transaction resulting in a chargeback could easily be more than the price of a new EMV device.

If most of your customers are other businesses or if you have an ongoing relationship or contract with your customers, there is a lower risk for EMV-related chargebacks. And if you don’t process a lot of credit or debit transactions, or your average ticket is just a few dollars, the risk of a fraudulent transaction is low. But it’s still a good “insurance policy” to upgrade to an EMV payment terminal and protect your business.

Unfortunately, some unethical providers view EMV as another opportunity to invent extra fees, and bury them in statements using confusing descriptions. Be on the lookout for EMV non-compliance fees or Old Equipment charges if you have not yet upgraded your payment terminals.

Features to Look For When Evaluating EMV Card Readers

As we’ve discussed in detail, the primary benefits of updating to EMV technology are:

  • Protection from fraudsters using stolen or counterfeit cards
  • Protection from chargebacks related to the EMV liability shift
  • Increased customer trust

However, not all EMV card readers are created equal. Here are a few key features to look for when shopping around for an EMV Card Reader:

Customer-Facing Terminal: Speed transactions and eliminate unnecessary touchpoints by implementing a customer-facing device. 

Cloud-Connected Terminal: A cloud-connected EMV payment terminal ensures that no sensitive card information is stored on the terminal or travels through your networks, increasing security and simplifying PCI compliance.

Contactless Payments: Extend customers the convenience of paying with the wave of a card, phone or wearable device. Make sure your EMV card reader can accept payments made with digital wallets such as Apple Pay and Google Pay.

Eliminate Signatures and Paper Receipts: Paper is wasteful. The card brands no longer require signatures and receipts for most in-person payments. Disabling signatures and receipts speeds up the checkout process, saving you time and money.

Virtual Terminal: A single-function payment terminal only accepts in-person payments. Choose an EMV card reader from a provider that also supports omnichannel payments to handle in-store, online, and invoice payments.

Integrated Payments: Streamline card acceptance and boost productivity by integrating an EMV card reader and payment processing with the software you use to run your business.

How PayJunction Can Help

PayJunction provides businesses award-winning, unparalleled service. We’re always willing to offer you professional advice from one of our payment specialists so you can better understand steps to improve your business operations. We can assess the solutions and billing practices of your current provider, and help you easily switch to PayJunction if it makes sense. We are here to help your business succeed.

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What is holding you back from upgrading your card readers? How has your provider helped you with this transition?

Editors Note: This post was originally published in April 2019 and has been updated for comprehensiveness and accuracy.

About Author
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Ursula Librizzi

Ursula is the sales and marketing operations manager for PayJunction. She oversees daily marketing tasks and liaises between the sales and marketing departments.

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