AME 3456 CHIP CARDS - Hilltop Bank · magnetic-stripe swipe. EMV Cards – Eight frequently asked questions 2. How do I use an EMV card to make a purchase?X •It will take a tiny

What is a Chip Card?A chip card—also known as an EMV card—is your

financial institution’s way of adding an extra layer of

security when you pay. Chip cards can be used anywhere your

other cards are used, but the chip functionality only works at a

business that has an activated chip-enabled terminal.

Why are Chip Cards more seCure? The chip generates a unique, one-time code each time you

dip your card at a chip-enabled terminal. Your purchase can only be approved with the chip-generated code.

The chip in your card is virtually impossible to duplicate. That means attempts by a fraudster to create and use counterfeit cards will be much harder.

hoW do i use it?Insert your card into the chip-enabled terminal with the chip first, facing up.

Leave the card in the terminal until the transaction is complete. You may be prompted to sign your name.

If there isn’t a chip-enabled terminal, use the card the traditional way and swipe.

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Exp. 2018

© 2015 American Bankers Association

More questions? Your bank is

ready to help. Simply visit the

website on the back of your card.

CHIP CARDSBanks are issuing payment cards embedded with security chips to help protect you against fraud at the register.

BANK NAME

1234 5678 9012 3456

JOHN DOEExp. 2018

The New EMV Chip

• The nationwide shift to EMV is well underway.

The New EMV Chip

• EMV -- which stands for Europay, MasterCard

and Visa -- is a global standard for cards

equipped with computer chips and the

technology used to authenticate chip-card

transactions. In the wake of numerous large-

scale data breaches and increasing rates of

counterfeit card fraud, U.S. card issuers are

migrating to this new technology to protect

consumers and reduce the costs of fraud.

The New EMV Chip

• These new and improved cards are being deployed to improve payment security, making it more difficult for fraudsters to successfully counterfeit cards.

• For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems, and complying with new liability rules.

• For consumers, it means activating new cards and learning new payment processes.

• Most of all, it means greater protection against fraud.

The New EMV Chip

• Approximately 120 million Americans have

already received an EMV chip card.

• That number is projected to reach nearly 600

million by the end of 2015.

EMV Cards – Eight frequently asked questions1. Why are EMV cards more secure than traditional cards?

• It's that small, metallic square you'll see on

new cards. That's a computer chip, and it's

what sets apart the new generation of cards.


• The magnetic stripes on traditional credit and debit cards store contain unchanging data. Whoever accesses that data gains the sensitive card and cardholder information necessary to make purchases. That makes traditional cards prime targets for counterfeiters, who convert stolen card data to cash.


• WAIT, WHAT'S THE CARD CALLED?

• As the U.S. payment industry transitions to EMV technology, there's a lot to adjust to, starting with what to call the new cards. They might be called any of the following terms:

• Smart card

• Chip card

• Smart-chip card

• Chip-enabled smart card

• Chip-and-choice card (PIN or signature)

• EMV smart card

• EMV card


• If someone copies a mag stripe, they can

easily replicate that data over and over again

because it doesn't change.

• Unlike magnetic-

stripe cards, every

time an EMV card is

used for payment,

the card chip creates

a unique transaction

code that cannot be

used again.


• If a hacker stole the chip information from one

specific point of sale, typical card duplication

would never work because the stolen

transaction number created in that instance

wouldn't be usable again and the card would

just get denied.


• EMV technology will not prevent data breaches from occurring, but it will make it much harder for criminals to successfully profit from what they steal.

• Experts hope it will help significantly reduce fraud in the U.S., which has doubled in the past seven years as criminals have shied away from countries that already have transitioned to EMV cards.

• The introduction of dynamic data is what makes EMV cards so effective at bringing down counterfeit card rates in other countries.


• Just like magnetic-stripe cards, EMV cards are processed for payment in two steps: card reading and transaction verification.

• However, with EMV cards you no longer have to master a quick, fluid card swipe in the right direction. Chip cards are read in a different way.

EMV Cards – Eight frequently asked questions2. How do I use an EMV card to make a purchase?

• Instead of going to a register and swiping your card, you are going to do what is called 'card dipping' instead, which means inserting your card into a terminal slot and waiting for it to process.

• When an EMV card is dipped, data flows between the card chip and the issuing financial institution to verify the card's legitimacy and create the unique transaction data. This process isn't as quick as a magnetic-stripe swipe.


X

• It will take a tiny bit longer for that transmission of data to happen.

• If a person just sticks the card in and pulls it out, the transaction will likely be denied. A little bit of patience will be involved.


• Not necessarily.

• EMV cards can also support

contactless card reading, also

known as near field communication.

• Instead of dipping or swiping, NFC-equipped

cards are tapped against a terminal scanner

that can pick up the card data from the

embedded computer chip.

EMV Cards – Eight frequently asked questions3. Is card dipping the only option?

• Contactless transactions are more consumer-

friendly because you just have to tap.

• Around the world, there is a move to make

EMV cards dual-interface, which means

contact and contactless. However, in the U.S.,

most financial instructions are issuing contact

cards.


• Dual-interface cards and the

equipment needed to scan

them are expensive. Right

now, the first step is to

successfully integrate EMV

cards into the U.S. shopping

scene.

• Dual interface will arrive later.


• Yes and no. You will have

to do one of those

verification methods, but

it depends on the

verification method tied

to your EMV card, not if

your card is debit or

credit.

EMV Cards – Eight frequently asked questions4. Will I still have to sign or enter a PIN for my card transaction?

• 1.2 billion: Estimated number of credit and

debit cards that have to be ugraded to chip

cards.

• 12 million: Estimated number of point-of-sale

terminals that have to be upgraded to accept

chip cards.

CHIP CARDS, BY THE NUMBERS


• 59%: Percentage of retail locations that will be

EMV-compliant by the end of 2015.

• 181,000: Current number of EMV chip-

activated merchant locations

• 41%: Percentage of US. debit cards that will be

issued as EMV cards by the end of 2015


• 70%: Percentage of U.S. credit cards that will

be issued as EMV cards by the end of 2015

• $3.50: Average cost for issuing a new EMV

card

• $500-$1,000: Average cost of an EMV-

compliant point-of-sale terminal

• Chip-and-PIN cards operate just like the checking-account debit card you have been using for years.

• Entering a PIN connects the payment terminal to the payment processor for real-time transaction verification and approval. However, many payment processors are not equipped with the technology needed to handle EMV chip-and-PIN credit transactions. So it is not likely you will have to memorize new PINs anytime soon.

• As with a magnetic-stripe credit card, you sign on the point-of-sale terminal to take responsibility for the payment when making a chip-and-signature card transaction.


• Once the transition to EMV is under way in

the U.S., chip-and-PIN cards will be

transitioned in.

• It is one step at a time.

• It will probably take two to three years to fully

convert to chip-and-PIN.


• Despite a slow transition overall, those who

get chip-and-PIN cards will be able to use

them right away.

• If a terminal doesn't have the ability to accept

a PIN, it will then step down to accepting a

signature.

• There will always be a secondary option.


• Today, if an in-store transaction is conducted using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card's terms and conditions.

• After an Oct. 1, 2015, deadline created by major U.S. credit card issuers MasterCard, Visa, Discover and American Express, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction.

EMV Cards – Eight frequently asked questions 5. If fraud occurs after EMV cards are issued, who will

be liable for the costs?

• Consider the example of a financial institution that issues a chip card used at a merchant that has not changed its system to accept chip technology. This allows a counterfeit card to be successfully used.

• The cost of the fraud will fall back on the merchant.

• The major credit card issuers each have published detailed schedules about the upcoming shift in liability. The change is intended to help bring the entire payment industry on board with EMV by encouraging compliance to avoid liability costs.



• Any parties not EMV-ready by October 2015 could face much higher costs in the event of a large data breach.

• Automated fuel dispensers will have until 2017 to make the shift to EMV. Until then, they will follow existing fraud liability rulings.



EMV Cards – Eight frequently asked questions 6. So by Oct. 1, 2015, the transition to EMV

technology will be complete?

• Not exactly.

• Although the upcoming deadline is strong encouragement for all payment processing parties to become EMV-compliant as soon as possible, experts do not believe everyone will comply by that date.

• "Don't expect a big bang in October of 2015," says Doug Johnson, vice president of risk management policy for the American Bankers Association. "It's going to take a little time to adapt."

• Aite Group estimates that by the end of 2015, approximately 70 percent of credit cards and 41 percent of debit cards in the U.S. --1.1 billion cards total -- will support EMV.

• While many chip cards have already been issued, some people may have to wait longer than others before sent a new EMV card, according to Johnson.



• "If consumers have cards that are expiring between now and October, those will likely be first in line to transition to chip cards," he says. "Different companies will have different rollout strategies. Some will base their actions on card expiration dates; others will work to get chip cards into the consumer's hands by the October liability deadline regardless," says Johnson.



• So far, the large majority of chip cards going into the hands of cardholders are coming from larger issuers like Bank of America and Chase, according to the Federal Reserve Bank of Chicago. The cost of this EMV transition is causing smaller banks to convert their cards more slowly.

• EMV debit cards may be issued to consumers at an even slower pace due as banks retailers have to prep their software to accept those cards as well.



• Very few point-of-sale systems

can accept debit EMV in the

U.S. right now and the upgrade

specs were issued only late last

year.

• The debit delay will catch up by

the deadline.

– (we’ll see…)



• Yes. The first round of EMV cards -- many of which are already in consumers' hands -- will be equipped with both chip and magnetic-stripe functions so consumer spending is not disrupted and merchants can adjust.

• If you find yourself at a point-of-sale terminal and are not sure whether to dip or swipe your card, have no fear. The terminal will walk you through the process.

EMV Cards – Eight frequently asked questions 7. If I want to use my chip-card at a retailer that doesn't

support EMV technology yet, will it work?

• If chip-card readers are not in

place at a merchant at all, your

EMV card can be read with a

swipe, just like a traditional

magnetic-stripe card.

• You can still conduct

transactions, you just lose that

extra level of chip security.



• Many large retailers, such as Walmart, Target and Costco, have upgraded their POS terminals and are activating them for chip card acceptance, but smaller businesses are lagging when it comes to upgrading their payment technology.

• A Wells Fargo survey conducted in July 2015 found that less than half of small business owners (49 percent) who take card payments are aware of the upcoming EMV liability shift. Only 31 percent reported that their existing point-of-sale payment systems accept chip-equipped cards and another 34 percent said they will upgrade "at some point" after October.



• WHAT ABOUT MOBILE PAYMENT READERS?

• Retailers using mobile payment devices such as Square will also have to purchase new equipment to read the chips on EMV cards. Square has designed EMV-compatible card readers for Android and iOS devices that can read contactless mobile payments and also process dipped chip cards. Merchants can currently pre-order the new payment devices for $49.

• Until Square-based retailers upgrade, your new EMV cards will be processed without the added layer of encryption security the card chip provides.



EMV Cards – Eight frequently asked questions 8. Will I be able to use my EMV card when I travel outside the country?

• Yes and no.

• The U.S. is the last major market still using the

magnetic-stripe card system. Many European

countries moved to EMV technology years ago

to combat high fraud rates. That shift has left

many U.S. consumers who have magnetic-

stripe cards looking for other forms of

payment when they travel.

• Since many foreign merchants are wary of

magnetic-stripe cards, consumers who hold some

type of chip card may run into fewer issues than

those without one, according to Ferenczni.

• Just the existence of the chip will likely make

European merchants more willing to accept

transactions that they wouldn't have likely

accepted if a customer presented a mag-stripe

card.


• However, chip-and-PIN cards are the norm in most other countries that support EMV technology. So consumers with chip-and-signature cards may still find merchants who are unwilling or unable to process their card, even though it does have an embedded chip.

• Unmanned payment kiosks in Europe -- such as bike rental stations, train ticket stations and parking permit dispensers -- may give U.S. travelers the most difficulty since most are set up to strictly accept chip-and-PIN card only.


Thank You.

• Adapted from an article by Sienna Kossman

at http://www.creditcards.com

Documents

AME 3456 CHIP CARDS - Hilltop Bank · magnetic-stripe swipe. EMV Cards – Eight frequently asked questions 2. How do I use an EMV card to make a purchase?X •It will take a tiny