New credit and debit cards have been issued for some time now with a new addition – an EMV chip. The chip is a technology that's actually been around for over 20 years according to CNN WIRE. It has been implemented already in many other areas of the world. However, cards in the U.S. have lacked the technology until recently, opting to continue using the magnetic-striped cards that have been around even longer than the EMV chip. Banks are now issuing cards that have the new technology, and retailers are being encouraged to implement point of sale technology that supports EMV chips.
What is the chip
EMV chips are basically small computer chips placed inside a card that looks much like the debit cards everyone is used to. The chip holds the user's payment information. The magnetic strip on the back of older cards did the same thing, but those cards are easy to steal and duplicate. EMV technology is much more secure in most cases, because it creates a unique signature for each transaction, according to Time magazine.
"The microprocessor adds additional security data to the transaction each time the card is [used]," Randy Vanderhoof, executive director of the Smart Card Alliance, told CNN WIRE.
With magnetic-strip cards, thieves could skim for your card information and then create a duplicate card. The strip on the old cards used the same signature all the time, so once duplicated it could be used to make fraudulent charges.
Liability rules encourage businesses to switch card readers
On Oct. 1 there is a liability shift, meaning the card company may not be responsible for stolen money. Currently the card-issuing company handles fraudulent charges. Once October comes, however, the responsible party will be whoever has older equipment, Time reported.
This means retailers who don't have EMV technology installed on their card readers have a pretty big incentive to go out a buy new equipment. Still, it will likely take some time for the new technology to be adopted everywhere.
New card readers open the door wider for mobile payments
Oddly enough, chip technology in cards may encourage consumers to utilize new forms of payment such as Apple Pay or Google Wallet. The new card processors that are required to read EMV chips are also equipped with near-field-communication technology, which is the technology that is used to process mobile payments. So, when merchants choose to upgrade their credit card processors, they may find that many of their customers are paying with their phones instead of their new EMV chip equipped cards, according to Time.