As the furor over recent security breaches at Target and other retailers subsides, the benefits of EMV credit and debit cards have been getting a lot of attention. EMV cards, which contain a chip rather than a magnetic stripe, are used in many countries -- and fraud related to counterfeit activity has declined dramatically in those markets.
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While the information contained on magnetic-stripe cards remains static, the data for each EMV transaction is encrypted and unique. That makes producing counterfeit cards difficult. “Even if fraudsters were to intercept a transaction, creating a legitimate transaction with the information would be nearly impossible,” says Carolyn Balfany, senior vice-president of product delivery for MasterCard. If EMV technology had been in place, say, at Target, thieves might have cracked its system, but the impact would have been minimized.
Some U.S. card issuers, including Bank of America, Chase and Citibank, have introduced cards with both magnetic stripes and chips. But cardholders won’t benefit from the enhanced security unless the terminals where they use the cards are equipped for EMV transactions, Balfany says. And few U.S. banks and merchants have adopted EMV.
American Express, Discover, MasterCard and Visa have devised a plan to encourage widespread use of EMV. Starting in October 2015, liability for certain fraudulent transactions that EMV could have prevented will be the responsibility of any party that hasn’t adopted the EMV standard. That puts the onus on issuers to distribute chip cards to customers and on merchants to be ready to accept them. However, cardholders who have not received chip cards will not be penalized.