What is the Difference Between EMV Cards and Magnetic Strip Cards?
The magnetic strip credit card has been the standard for decades, but now, a new credit card standard is taking over markets around the globe. This standard is the EMV-chip card, which has the main benefit of offering increased security during transactions. In this article, we’re going to take a look at the differences between these two standards.
The EMV transaction
EMV-cards allow customers to choose between two types of transactions: contact and contactless. A contact transaction is similar to the regular transaction of the magnetic strip card, with the main difference being that the card must remain inside the payment terminal for the entire duration of the transaction.
Contactless transactions on the other hand works by lightly tapping the card to a payment terminal which supports this type of transaction. Previous iterations of contactless cards used RFID, which stands for radio frequency identification, while EMV transactions use NFC, which is near field communication. The NFC can store more data than the RFID, making it harder to create a forgery of an EMV card.
How does an EMV Transaction work?
The magnetic strip transaction uses a swipe-and-sign system, which is highly susceptible to frauds or data breaches. The EMV card on the other hand can use either a PIN or a signature. With a contact card, you will have to insert the card into the terminal, enter the amount of the transaction, and then, if a PIN is required, the customer enters it, and the transaction is complete. A receipt will be printed, and you may remove the card at that time. The process is similar with a contactless card, with the main difference being that the card is not inserted into the payment terminal.
Why is the EMV card more secure?
Due to the chip’s ability to hold more data, the approval and transfer processes are more complex. The card will exchange data with the payment terminal and create a custom transaction requests, which contains information from both the terminal and the card. With the request formed, the terminal will decide on one of three options: send the request to the credit card issuer in order to approve the transaction, approve the transaction without sending the request for approval, or decline the transaction.
The request is sent as a cryptogram through the payment network, and this cryptogram carries a digital signature based on the data found on the card. This cryptogram is authenticated by the issuer, and if the transaction is approved, it is send back to the terminal and the process is complete. All that’s left is for the funds to be transferred into the vendor’s merchant account.
To conclude, the main difference between the two standards is security. The EMV chip is likely to completely replace the magnetic strip in the near future, since it is simply better in nearly all regards.
For more information on the difference between swipe cards and chip cards, or to open a merchant account, please call (888) 924-2743 or go to Charge.com.