The landscape of mobile banking, credit cards and payment options is changing. EMV chip technology, developed by Europay, MasterCard and Visa, is a new concept designed to replace that old, magnetic stripe on the back of dozens of plastic cards in everyone's wallets. And, the changes will have a major impact on merchant services.
As the technology continues to gain popularity and prominence, odds are, chip-based cards will soon be everywhere.
What are EMV chips?
EMV-enabled cards have a microprocessor chip built into each one. Data is encrypted and can be designed to require different security protocols, depending on certain preferences, according to Bankrate.com.
For example, one person's card might need a pin number to use. With another, a signature could get the job done. EMV chips are already popular in Europe and Asia, although the U.S. is slowly catching on to the new technology.
"The U.S. is behind for a very simple reason: Consumers have not been asking for chip cards," Bill McCracken, CEO of financial services marketing firm Synergistics Research Corp., told the news source. "They have not understood the benefits of a chip card over a mag stripe. So why switch?"
Now, the reason some people are switching over is because of security. Each time a EMV chip card is used, the transaction's information is encoded in a different way, so private data is more difficult to track, Bankrate.com noted. The technology reduces the chances of a skimming scam.
Soon, merchant services will have to incorporate EMV chips into their operations. More businesses and consumers will use them, and others who don't adapt will be at a disadvantage.
How EMV will impact merchant services
EMV technology is trending upward because losses from fraud are high, according to First Data. Mobile banking and other financial services present a certain level of risk, and EMV can help reduce the dangers.
Moreover, regions that are currently using EMV chip cards have seen improvements against card-related fraud, the news source reported. Magnetic stripe cards are using a concept that was first put in place more than four decades ago. That means current technology has many insecurities and flaws. The conception of an effective new idea was only a matter of time, and EMV chips have been proven to be more successful than their predecessors.
Soon, Europay, Visa and MasterCard will require service providers and other users to be able to process these transactions, according to Forbes. In October 2015, any merchant who does not make the switch will accept all liability for counterfeit transactions.
The many positives of EMV technology, as well as the global trend of acceptance, means that now is a good time for all merchant services to begin integrating these chips into their operations.