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EMV chip

EMV chip definition

An EMV chip is a small microprocessor embedded in credit and debit cards that securely stores and processes payment data. EMV itself is a technical standard for smart payment cards and stands for “Europay, Mastercard, and Visa,” the three companies that created it.

Compared to magnetic stripe cards, EMV chip technology improves transaction security and reduces fraud. Magnetic stripe cards can be more easily copied or skimmed, whereas EMV chip cards generate unique transaction data for each payment.

See also: smart card, unauthorized access, security token, EMV tokenization

How EMV chips work

When an EMV chip card is used for a transaction, it generates a unique cryptogram that must be validated by the payment terminal or card reader. To authorize transactions, most EMV chip cards use a process known as “chip and PIN” (personal identification number) — the cardholder inserts the EMV chip card into a compatible card reader and enters their PIN to authenticate the transaction. Some EMV cards use “chip and signature” instead, requiring the cardholder’s digital signature for authorization.

EMV chip technology also supports contactless payments, allowing cardholders to make transactions by tapping their EMV chip cards on compatible payment terminals. The user may disable verification for contactless transactions that fall below a certain threshold (for example, when making small everyday purchases at the grocery store), but this increases the risk of financial loss if the card is lost or stolen.