EMV, or "chip cards, have been around for more than a decade and are available in more than 80 countries.
This technology has provided substantial results in reducing fraudulent counterfeit cards as well as increasing international sales. So is this the Silver Bullet the U.S. has been waiting for? The short answer is...maybe.
The antiquated magnetic stripe we use everyday in the U.S. contains static information that can easily copied and transferred on to another magnetic stripe to create a counterfeit card. On average, EMV has reduced fraud by 40 to 60% and in some cases, much more. The reason for this is that chip technology uses cryptographic algorithms to authenticate the card while generating a unique code for each transaction. This renders the information useless if the fraudster attempts to utilize that information for another card present transaction.
There are some key considerations that must be taken in mind regarding chip technology: Proper Implementation is essential to ensure effectiveness; as fraud is reduced in card present transactions, it will migrate to the card-not-present environment; and a multi-layered approach to fraud prevention is the best strategy.
Also, EMV is just one of three key tools to fight fraud, with other important measures including encryption and tokenization.
As such, the chip cannot fight all payments crime alone. While the dynamic information is rendered useless for card present transactions, the static information can still be used in a card-not-present environments like e-commerce.
There is good news however; a plethora of fraud tools are available to protect the card-not-present transactions. There is actually much more information available in a card-not-present environment to analyze and determine the associated risk with this type of transaction, than with a card present transaction. One such tool that is receiving a second wind in the U.S. is 3D Secure, a powerful tool in the arsenal against fraud for eCommerce.
Also, chip technology has arrived in the U.S. at a time when the payments industry is experiencing a paradigm shift. Chip technology not only addresses the fraud challenges that are making headlines on a regular basis, but it also opens the doors to payment options that other countries have been enjoying for many years.
As the union of mobility and payments have finally reached our shores with the recent announcement of Apples new NFC iPhone, industry leaders are talking about the future of payments in the present tense.
So is chip technology, the Silver Bullet? Yes, but maybe not for what you originally thought it was for. When part of a comprehensive approach, chip cards can help enable a number of different payment innovations.
Eldred Garcia is the co-founder of E-Chip Miami.
