Chip cards have considerably more “intelligence” than magnetic strip cards, explaining why they are often called smart cards. The chip is a platform which runs a certified operating system and a highly secure payment application, along with encryption algorithms, encryption itself, and other security measures.
Unlike static magnetic strip cards, chip cards support dynamic authentication. For each transaction, they require new values produced by the chip. The digital signature of payment data also ensures the integrity of the transaction. This enables protection from “skimming”: duplicating magnetic strip cards using simple readers.
Transactions with EMV-based chip cards also use risk management parameters, which reduce the risk from non-authorized payment processes. Thanks to better methods of cardholder verification – such as the use of a PIN – a robust authentication is achieved, which significantly reduces the damage caused to end customers and banks from lost or stolen cards.
EMV cards can also be used for contactless payment. These cards use identical or similar standards as contact-based chip cards and have the same level of security. The difference between the two types is largely how transactions are processed. The contactless payment process is particularly envisaged for low amounts on public transportation or in retail, enabling consumers and traders to benefit from a speedy and comfortable transaction.
In addition to security benefits, the versatility of EMV cards also open up new commercial possibilities for banks. In addition to traditional electronic payment, they can also be used as a ticket for public transportation, as a loyalty card or for physical and logical access. Moreover, EMV increases efficiency in payment transactions by digitally recording transaction data.