What Is an EMV Card Reader and How Does It Work?

Across the world, the issuing and use of EMV cards are rising rapidly. These credit and debit cards aim to make card-present transactions more secure. And this has resulted in a drastic reduction of card fraud globally.

For this reason, merchants operating brick-and-mortar locations and physical stores are increasingly equipping themselves with EMV card readers to lessen the burden of card-present fraud. While this global standard isn’t compulsory, widespread adoption has become the norm.

If you are still on the fence about implementing and accepting EMV payments, this post is for you. Below, we explore what EMV and EMV payments are so that you can make an informed decision that keeps your business’ payment acceptance safer. Read on to find out more.

What does EMV stand for?

EMV stands for Europay, Mastercard, and Visa, the three card issuers that designed the EMV standard. Later, however, other card issuers such as American Express, Discover, JCB, and UnionPay joined forces with EMV and worked together to develop and implement EMV software.

In short, EMV refers to the chip technology present on credit or debit cards. It aims to make card-present transactions more secure while adding greater global interoperability.

For this reason, an EMV reader or an EMV terminal is required to properly “read” the chip and facilitate a smoother and safer payment authorisation process.

How does EMV technology work?

In its simplest form, EMV technology works with two primary physical aspects: an EMV chip card and EMV card readers. The EMV chip card is inserted into an EMV card reader through a process called “dipping”. The insertion takes place vertically, with the chip facing up.

Once inserted, a cardholder is prompted to enter a four- to six-digit personal identification number (PIN) into the reader, creating a unique code during the EMV transaction.

The code is sent to the card reader, which then verifies that the PIN is accurate and that the transaction can proceed.

After this, the “communication process” begins between the card issuer, the merchant’s bank and the payment processor, where payment data is exchanged. It results in an authorised or declined transaction, depending on whether the cardholder has sufficient funds in their account.

If the transaction is approved or authorised and the cardholder’s payment process is complete, the payment goes through. The funds are then transferred to the merchant’s business account. 

Is EMV more secure?

In the past, a debit or credit card payment was carried out by swiping the magnetic strip card on a payment terminal. However, since no unique code was generated for each transaction, backed by the protection method of inserting a PIN, there was a greater chance of credit card fraud.

Today, the amount and number of payment fraud cases has drastically decreased worldwide due to the implementation of the EMV solution. Although it is not yet at 100% adoption rates, using chip and PIN for card-present transactions is a more secure way to transact at physical locations and stores.

Global standards and regulations for EMV technology

Ensuring EMV compliance is smart for many merchants who run physical stores and accept card-present transactions. The EMV standard was introduced in France in 2005, in the United Kingdom in 2012 and in the United States in 2015.

It is said to be almost 100% effective in reducing face-to-face counterfeit card fraud on POS terminals. However, it is essential to note that EMV is not mandatory, and no law mandates its use.

However, not being EMV compliant can create an EMV liability shift, making merchants responsible for card fraud. As such, it is highly recommended that merchants adopt EMV chip technology by implementing point-of-sale payment terminals at their physical stores.

EMV payment solutions

EMV payment solutions are implemented at two specific points: point-of-sale terminals and automatic teller machines (ATMs), where funds are typically withdrawn.

In these cases, cardholders insert their chip cards or IC cards, which stand for integrated circuit cards, into POS sale terminals. A unique code is generated for the specific transaction.

The cardholder is prompted to enter their PIN, after which payment processing begins. The liability shift from banks to merchants is significant, so adopting this technology and being EMV-compliant are crucial for all merchants with a physical store.

What are EMV chip cards?

In short, EMV chip cards are credit or debit cards that are equipped with a special ISO chip. This highly sophisticated computer technology reduces card payment risks. As opposed to making payments using a magnetic stripe card, chip cards require inserting the card into a card reader and not swiping the card’s magnetic stripe on the payment terminal.

This way, secure payments are ensured.

Types of EMV chips

There are two types of EMV chips:

• Chip and PIN: This is where a customer is required to enter a PIN after inserting their card into a card reader during a payment transaction.
• Chip and signature: In these cases, when a transaction is processed, a cardholder will have to insert their card in the EMV card reader and then sign. However, these chip and signature cards are becoming outdated quite quickly.

Such EMV chip payments make credit and debit cards much safer to use, drastically reducing the chances of card duplication and payment fraud.

What is an EMV reader?

Significant technological advances have been made in the space of EMV-compliant POS terminals to accept card-not-present payments from chip cards.

These EMV readers are designed to accept chip payments as they have a physical slot for the card’s insertion.

They are also equipped to read the sophisticated computer chip on the card and generate the unique transaction code for the transaction.

Types of EMV readers

Several types of EMV readers comply with EMV specifications to accept EMV payments.

Some examples include:

• Mobile card readers: These can be transported with a merchant and are highly convenient in cases where the merchant goes to a customer instead of a customer going to the merchant.
• Portable card readers: Portable card readers are ideal for restaurants and coffee shop businesses, which means that the reader can be taken to customers at their table.
• Countertop card readers: This group of stationary card readers is usually fixed to a countertop and is immovable. They are usually placed at checkout points in stores and require the customer to come to the card reader to initiate the transaction.

While there are other types of EMV card readers, these are the most common ones available on the market. In addition, devices need to go through a process of certification to ensure that they are EMV compliant.

Benefits of EMV card readers

Being able to accept PIN cards means needing to accept EMV transactions. While many merchants may find the shift difficult or cumbersome, an EMV migration comes with several distinct and significant advantages.

Here are a few worth considering:

• Accepting EMV card transactions offers you an additional avenue for accepting payments, helping your business grow.
• Focusing on accepting an EMV payment card means a much lower risk of accepting fraudulent card transactions.
• The liability shift from the card issuing bank to the merchant is a significant point of consideration. However, if you are EMV compliant, the risk and burden on you decline significantly.
• By offering your customers the chance to pay with a more secure and widely accepted payment method, you increase their convenience in shopping at your store, thus enhancing the customer experience and boosting customer trust and loyalty.
• While some EMV readers still allow payments that accept magnetic stripe cards, the chances of accepting a fake card are greatly reduced.

With so many benefits of accepting EMV payments, you may wonder if your business needs to do so. We explore the answer to this question in more detail below.

Does my business need to accept EMV chip cards?

While your business doesn’t need to accept EMV chip cards, it is highly recommended that you do so. Merchants are exposed to a much greater liability shift, and you risk exposing your business to fraudulent transactions with stolen data.

In addition, the use of magnetic stripe payments is rapidly declining due to security concerns, as no unique code is generated during the transaction. This absence of an additional security layer is critical to keeping your business safe from fraudulent transactions and reducing the chances of accepting counterfeit cards.

Conclusion

Being able to accept EMV payments is an essential way of ensuring your business is safe from fraud while offering your customers an exceptional and secure payment experience. It’s about selecting the right card reader from the right payment services provider to ensure your complete peace of mind.

If you are looking for the perfect card reader for your business, why not explore the range of options that myPOS offers?

With full EMV compliance, instant fund settlement, and a broad range of perks, such as a free merchant account and business card, you can enhance your business operations while ensuring greater safety for your business and customers when accepting card-present payments.

Frequently Asked Questions

Does EMV apply to online transactions?

The EMV standard only applies to card-present transactions and not to card-not-present transactions, which are online transactions.

What is “card shimming”?

Merchants should be aware of the fraudulent practice of card shimming, in which a scammer inserts a “shim” (thin device) into a card reader that accepts EMV cards. This device then copies and stores data from a cardholder’s card.

While it is impossible to produce an identical copy of the same chip card with this information, it is possible to produce a magnetic strip card with the information stolen from the EMV card.

Are EMV cards safe?

Whether you use EMV chip and PIN cards or EMV chip and signature cards, these cards are secure forms of contact transactions.

Are all credit cards with chips EMV-compliant?

While not all credit cards with chips are EMV-compliant, most are in today’s age. If you aren’t sure whether your card’s chip is EMV compliant, it is best to speak to your issuing bank for further clarification.

Are you legally required to accept EMV?

No legally mandated rule requires merchants to accept EMV payments. However, taking the EMV stand makes your business more credible and trustworthy in your customers’ eyes and reduces the chances of card-related fraud.

What’s the difference between EMV vs. NFC?

You may have heard of EMV contactless payments, which are also card-present transactions and use Near-Field Communication (NFC) technology.

Many modern cards are equipped with both a chip and an NFC logo, meaning that you can pay with a chip and PIN or with your contactless cards. It’s also possible to add your card to your digital wallet, such as Apple Pay, and make mobile payments. These transactions are much faster and are also highly secure.

What are SDA and DDA?

In the past, card authentication methods were based on static data authentication (SDA). However, due to technological advances, most payment cards issued today feature more sophisticated dynamic data authentication (DDA) or combined data authentication (CDA).

DDA is a protocol that performs offline checks to determine whether an EMV card is legitimate. The card data is used to enable the EMV terminal to authenticate the card.