The EMV chip card
EMV cards are trying to make landfall in the U.S., thanks to major initiatives from the payment networks -- Visa, MasterCard, American Express and Discover.
Widely used abroad, these cards contain a microprocessor chip that stores the account information and communicates to the checkout computer at purchase. The chip then encrypts the purchase data uniquely each time it's used. Vanderhoof refers to this as "dynamic" data.
This makes it harder for criminals to pick up useful payment data and use it again for another purchase, and it practically wipes out counterfeit fraud. In the U.K., counterfeit fraud fell by more than 70 percent from 2007 to 2012 after the countrywide adoption of EMV cards, according to a report from the UK Cards Association and Financial Fraud Action UK.
EMV cards come in two varieties: chip-and-PIN and chip-and-signature. The former requires a personal identification code to further verify a transaction and helps to prevent fraud from lost or stolen cards, Carolyn Balfany, senior vice president and group head at MasterCard, explained at the Card Forum & Expo in April. The second requires only a signature and is less effective against lost or stolen fraud.
But EMV isn't ironclad. Chip cards guard only against counterfeit fraud. It doesn't help prevent fraud that occurs when only the account information is used for a purchase, such as over the phone or online.