With instances of ATM skimming on the rise, and the EMV migration in full swing, there tends to be confusion surrounding these two topics. Many are under the impression that chip and pin cards will bring an end to card fraud at the ATM. This is sadly not the case. Although EMV cards will help reduce ATM skimming and other instances of fraud, chip-enabled cards are not the key to stopping all fraud. We’re here to shed some light on the myth that chip cards will be the end-all to card skimming.
Many instances of ATM fraud involve a long-established technique known as skimming. ATM skimming is like identity theft for debit cards. Thieves use hidden electronics to copy personal data from the magnetic stripe on an ATM card. Generally, a skimming device is accompanied with a PIN capturing device/camera. Criminals are then able to manufacture counterfeit debit cards using the stolen information.
EMV Cards & the Liability Shift
EMV stands for Europay, MasterCard and Visa. The main driver behind the EMV migration is card fraud. Annual costs of card fraud in the U.S. alone are estimated at nearly $8 billion. As global and domestic losses continue to rise, ensuring compliance with a global chip-compatibility strategy is more important than ever. In a nut shell, EMV cards offer a more secure method of payment. Called an EMV chip, the little piece of equipment adds a layer of security at business’ card terminals.
The liability shift is about who assumes liability for any transactions, made using a chip-enabled card, that are found to be fraudulent. MasterCard defines the liability shift as “the party, either the issuer [financial institution] or merchant, who does not support EMV, assumes liability for counterfeit card transactions.” What this means is that banks, credit unions, and merchants must start implementing EMV-compliant cards and devices, or risk paying the price.
What is the difference between the EMV chip and the magnetic stripe?
Take a look at the back of your credit card. What do you see? For most, you’ll probably find a thick black band known as the card’s magnetic stripe. Magnetic stripes are incredibly vulnerable, and much more prone to fraud, because the information stored on the card is static, unchanging data. When a skimming device reads the data of a card’s magnetic stripe, the information can be copied, counterfeited, and used to make purchases. Since the data does not change, it can be replicated over and over again. This makes traditional cards prime targets for counterfeiters, who convert stolen card data to cash.
Instead of a magnetic stripe, EMV cards are embedded with a tiny chip that encrypts personal data, which is much more secure than the traditional magnetic stripe card. This chip generates a unique transaction code every time it is used to make purchases. Instead of swiping the card, users place it into a card reader, and then provide a signature or PIN number. Because the card’s information changes after every transaction and cannot be used again, the data skimmed from it would essentially be useless to a criminal. According to CreditCards.com, if a hacker were to steal chip information from one specific point of sale, typical card duplication would never work “because the stolen transaction number created in that instance wouldn’t be usable again and the card would get denied.”
In the grand scheme of things, EMV does not completely prevent skimming. Despite ongoing efforts to speed up the EMV migration, it will be some time until the U.S. is completely EMV-ready. Between distributing chip-enabled cards to the general population, and upgrading or installing new equipment that is EMV-compliant, there is still a lot of work to be done. Although more and more chip cards are being issued, there is no guarantee that the terminal you’re using your chip card at will be EMV compliant. Due to this delay, most chip cards will still have the magnetic stripe on the back of them. As long as a magnetic stripe is placed on cards with an EMV chip, the ability to skim that card will remain. EMV technology may enhance security, but it does not put an end to all fraud.
What can you do?
Due to the fact that EMV does not completely prevent card skimming, NuSource recommends investing in TMD Security’s anti-skimming technology. Until all deployers in the U.S. have upgraded their terminals to be EMV-compatible, chip cards will still be vulnerable. For now, merchants and consumers must take all the necessary precautions.