EMV Liability Shift: History, Definition, & More

What Exactly is EMV?

EMV, from Europay, MasterCard, and Visa, is a technical standard for smart payment cards, payment terminals and automated teller machines that enhance transaction security. In contrast with commonly used debit and credit cards, which operate on a readable magnetic data stripe, EMV cards rely on dynamic digital data at point-of-sale (POS) machines, thereby reducing the risk of counterfeit use or account data theft.

EMV cards are "smart", because they store account data on integrated circuits, with some also including magnetic stripes for backward compatibility. Contact or “chipped” cards must be physically inserted ("dipped") into a slot in the card reader. Many new cards also contain the ability to pay via near field communication (NFC). Contactless cards are read over short distances through radio-frequency identification (RFID) technology, and are processed by “tapping” the card on a POS. NFC is also the technology used when paying via a smartphone or smartwatch.

Payment cards that comply with the EMV standard are often called Chip-and-PIN or Chip-and-Signature cards, depending on the exact authentication methods required to use them.

What is the History of the EMV Payment Standard?

In-person credit or debit card transactions once relied entirely on a mechanical imprint or magnetic stripe for reading (and recording) account data, with a signature, and later a personal identification number (PIN), for verification. In such transactions, the customer hands the payment card to the clerk, who swipes the card through a magnetic reader (or makes an imprint). The clerk then verifies the customer signature on the back of the card to authenticate the transaction.

These system cards can be stolen in the mail and fraudsters can forge signatures, or create new ones. Advanced thieves have also used technology to steal account information from the actual card readers. In recent years, techniques have been developed to read card information remotely, even from when a credit card is safely inside a wallet or purse.

For some time, banks recognized the benefits of chip based POS electronic payments. The first standard for "smart" payment cards was used in France in 1986, with an updated version in 1989. Germany also developed a smart card. Then came the realization of the need for international standards to aid security and foster global interoperability.

In 1994, Europay, MasterCard, and Visa joined forces to create the first EMV standard. The first version of EMV Contact Specifications was published in 1996; updated versions have been published in years since. The standard is now managed by the consortium EMVCo, split equally among American Express, China UnionPay, Discover, JCB, Mastercard, and Visa.

The EMV standard has been adopted by more than 80 countries, significantly reducing counterfeit card fraud and saving hundreds of millions of dollars.

How Does the EMV Standard Protect Users?

EMV smart card based card payment systems improve account and transaction data security for cardholders, merchants, and issuers while reducing associated fraud, by using the latest data authentication and cryptographic technology. EMV provides added protection against counterfeit use, theft, and customer loss.

An EMV chipped card:
• Secures online transactions and protects against fraud through a transaction-unique online cryptogram
• Supports enhanced cardholder verification methods
• Stores considerably more information than magnetic stripe cards

A transaction-unique digital seal or signature in the chip also authenticates safely in an offline environment, preventing criminals from using fraudulent payment cards.

-- EMVCo: "About EMV"
-- Wikipedia: "EMV"
-- MasterCard: "EMV: The future of payments with MasterCard®"