EMV or chip-based cards provide added security for credit card processing and merchant account services. Modern point-of-sale devices will most likely remain with us for some time, and these devices require more secure credit card processing.
Businesses such as those providing merchant services need to offer their customers easy modes of payment. Ideally, merchant account providers should accept virtually all types of payment, but providing chip based cards satisfy a client’s security needs too.
Why are Chip-Based Cards More Secure?
Chip-based technology or simply EMV employs a secure microprocessor chip on the card. The chip holds data securely and uses end to end cryptography when a payment transaction is made. The cards hold security credentials encoded by the card issuer at personalization. The cards provide added security because the credentials are extremely difficult to be accessed by unauthorized personnel.
Common ways of fraud in the traditional magnetic stripe cards are card skimming and card cloning. The security credentials stored on the chip are an effective way to avoid these fraudulent activities.
During a transaction, the chip-based card is authenticated and the cardholder verified. In addition to that, the transaction is also authorized via online and offline methods, and made sure it fulfills the issuer-determined risk parameters.
The cards are made in a way which ensures that even if someone manages to steal account data from chip transactions, a transaction cannot be made using this data. This is because each EMV transaction carries dynamic data.
Steps That Ensure Security of Transactions
The chip-card or EMV technology uses four steps to ensure no fraud takes place during an credit card transaction.
Card Authentication
Authentication during credit card processing provides security against counterfeit cards. Authentication takes place during the payment transaction. The cards need to be validated by the issuer via offline or online methods. The authentication is done using a dynamic cryptogram or offline with the terminal using Static Data Authentication (SDA), Dynamic Data Authentication (DDA).
The online and mobile credit card processing transactions done with EMV generate unique transaction data, which ensures that any captured data is not used for executing new transactions.
Verification of the Card Holder
Authentication of the cardholder during credit card processing provides protection against lost and stolen cards. This step ensures the individual wishing to make the transaction is, in fact, the true card holder.
The type of method to be used for verification depends on the associated risk of the transaction.
Transaction Authorization
This step includes the standard rules to authorize transactions for credit card processing. The authorization can be done either online and offline.
Online Authorization
In an online authorization, transactions are done with emv cards. Transaction data and a transaction-specific cryptogram are sent to the issuer. The issuer then confirms whether the transaction is valid or not.
Offline Transaction
In this method, the transaction can be authorized by the mutual communication of the card. They communicate to confirm whether the issuer-defined risk parameters that are set in the card are fulfilled by the transaction. Offline transactions are used when credit card processing terminals do not have online connectivity.
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