Shifting to a safer payment system

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WITH THE increased needs for security against card frauds, several measures have been developed to protect cardholders. Financial institutions are now in the process of introducing and adopting the EMV chip-enabled cards, designed to significantly improve and enhance opportunities for payment transactions.

EMV, which stands for its original developers, Europay, Mastercard and Visa, is a global standard for transactions made on chip-based credit and debit cards. The impressive technology features payment instruments with embedded microprocessor chips that store and protect cardholders’ data, making it harder for anyone to steal account information while making payments.

According to 2017 Debit Issuer Study commissioned by Discover Financial Services, the EMV technology has helped decrease fraud rates from 2015 to 2016 by 28%. Thus, the switch from traditional magnetic stripe to EMV chip-equipped cards has been adopted by card brands and banks all over the world.

EMV technology revolutionizes the payment ecosystem. Unlike the magnetic stripe on traditional card that contains unchanging data, EMV card generates a unique transaction code on every payment process that cannot be used again. This feature, known as dynamic authentication, makes it difficult for card fraudsters to copy cardholders’ data through the skimming device.

The EMV chip cards are also read via “card dipping” mechanism instead of the usual swiping of magnetic stripe cards. When an EMV card is dipped, data flows between the card chip and the issuing financial institution to verify the card’s authenticity. This process may not be as quick as the swiping process, but customers are ensured with safer and more secure payment transactions.

Host Merchant Services, a premier credit card and payment processing service provider, identified in its Website some of EMV chip-equipped cards’ benefits. First, EMV allows more secure card-present transactions.

Host Merchant said that EMV cards offer better transaction security to all parties involved in the payment process as cardholders’ information are stored in the encrypted microprocessor smart chips.

“It’s much more difficult to acquire the data, and it’s also more difficult to create fraudulent cards because that requires the technology to duplicate the microprocessor chip and the encryptions that protect its data,” Host Merchant explained.

Aside from contact or chip-and-pin transactions, EMV technology enables contactless and mobile transactions. Cardholders can simply tap their cards near a point-of-sale (POS) terminal, with no signature or PIN (personal identification number) needed, to settle payments. At a store that has mobile payment readers, consumers can also process the transaction by waving their smartphones over a terminal that automatically reads the payment information stored on the smart chip embedded in the card.

Host Merchant also said that EMV systems can operate in offline mode. “Because EMV cards contain microprocessors that can actually interact with terminals, they can perform offline transaction verification and offline cardholder verification.” EMV chip cards can use verification data from its own microprocessor smart chips to verify PIN codes and create cryptograms.

Since EMV technology is a global standard, cardholders can use the cards around the world in more than 130 countries.

According to EMVCo, a member-owned technical body that owns, enhances and promotes the EMV specifications as an inter-industry compatibility standard, the number of EMV payment cards in global circulation had increased by 1.3 billion in the previous 12 months to a total of 6.1 billion. It also said that 52.4% of all card-present transactions conducted globally between January and December 2016 used EMV chip technology, up from 35.8% for the same period in 2015.

In the Philippines, financial institutions are now ramping up the distribution of cards with EMV to meet the deadline set by the Bangko Sentral ng Pilipinas (BSP). In a statement, the central bank said that all BSP-supervised financial institutions (BSFIs) are given until June 30, 2018 to fully comply with the EMV requirement. BSFIs who will fail to do so will be subject to monetary sanctions provided under relevant provisions in the Manual of Regulations for Banks (MORB) and Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).

As of December last year, the BSP announced that around 90% of banks and other financial entities have already “substantially complied” with most of the technical requirements for the EMV technology shift. This is in terms of software upgrades and conversion of automated teller machine (ATM) units, point-of-sale (POS) terminals and clients’ cards to EMV.

“To raise awareness as well as manage customers’ expectations on the replacement of their payment cards, BSFIs should intensify their public awareness programs leveraging on all available communication channels. The information should clearly indicate the date when EMV cards are available and ready for pick-up by their clients as well as the related procedures for replacing magstripe cards and distributing EMV-compliant cards. BSFIs are further expected to develop strategies to entice or force clients to replace their old cards with EMV cards,” the BSP said.

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