Five months after Visa proposed carrot-and-stick initiatives for retailers to usher in EMV-enabled credit cards onto U.S. soil, the credit card company is clearing up one fundamental misconception: what EMV cards actually are.
In a blog Friday, the company distinguished between EMV-enabled credit cards and chip and PIN credit cards, two terms often used interchangeably (even by yours truly).
EMV-enabled credit cards are cards that contain an embedded microprocessor chip used for authenticating transactions. Chip and PIN is a type of EMV-enabled card that uses a personal identification code to approve offline transactions, Visa's Stephanie Ericksen, head of authentication product, wrote. Another offline authentication method is the traditional signature. But not every EMV credit card requires a PIN or signature.
This is a key point, because many U.S. issuers have been rolling out EMV-enabled credit cards, some with PINs and some without. This may confuse some consumers who have been hearing both terms used in the EMV discussion.
For example, Bank of America Merrill Lynch and Citi both introduced chip-and-PIN cards for corporate customers, while Chase features two chip-and-signature credit cards. (All the U.S. cards still feature the magnetic stripe for use domestically.)
Visa's Ericksen noted that in many cases, the U.S. doesn't need any kind of offline authentication on EMV cards. (In fact, less than 7 percent of transactions in Europe occur offline, she noted.)
"In the U.S., we can rely on online processing where transactions are transmitted in real time to the issuer for approval," Ericksen wrote. "With that in place, there's no need for the offline authentication that was the genesis of chip and PIN."
She also added that because online transmission has become so much cheaper since the creation of EMV in 1994, late adopters of the technology, such as the U.S., can avoid larger costs in using the older-generation chip and PIN cards.
Still, Visa will continue to support several methods of verifying the cardholder and authenticating transactions for EMV chip cards, such as signature, online PIN and no-signature for "low-value, low-risk transactions," she said.
In the long term, the company expects the industry will cut down or get rid of old-school nonchip cards that rely on signature or PIN for more advanced ways to approve transactions.
What are your thoughts on EMV credit cards?
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