The Flaws of EMV Chip Cards

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For the most part, the United States migration to EMV chip enabled credit cards and readers has begun smoothly, but now that this process is more than six months old, its clear that there are a few flaws with these new systems.

Longer Processing Times

The first thing that credit card users discover when they try to use their card with a chip reader is that it will take significantly longer to process. While the old magnetic stripe technology typically required a fraction of a second to read their card, the new microchip readers can take six to 15 seconds, and sometimes longer. To make matters more confusing, the chip reading process will fail if the card is withdrawn prematurely, and many credit card readers will not continue a transaction if the card is inserted early either. As a result, cardholders have been confused and transaction times have increased, dramatically in some cases. Thankfully, Visa has recently launched its new Quick Chip program that consists of a software upgrade for retail terminals that is designed to speed EMV chip transactions

Disabled Chip Readers

Adding to shopper's confusion is the fact that many retailers are using credit card terminals with EMV chip readers that are not yet activated. The problem is often that their credit card processors have upgraded their terminals over time, but are requiring expensive software upgrades to activate the terminals. And for some merchants, the benefits do not justify the expense. This leaves some consumers mistakenly attempting to use EMV chip readers, and being frustrated. In response, many retailers have resorted to simply taping over their terminal's chip readers. As time goes on, the software prices will fall and most retailers are expected to get on the EMV chip reading bandwagon.

Fraud Shift

The credit card industry has encouraged merchants and card issuers to adopt chip card technology through the so called liability shift, which now places the cost of fraud on the retailer or the card issuer, whichever one hasn't upgraded to chip technology. Nevertheless, criminals appear to be shifting their own behavior in response to this new technology. Specifically, gas stations appear to be under more frequent attack, as stations have been given two additional years to upgrade their credit card readers at the pump. Across the country, criminals have been installing credit card skimmers on pumps, which are relatively low tech devices that obstruct the legitimate card reader to capture information from customer's credit cards. Later, that information is used to create duplicate, or clone, credit cards. But in a year and a half, the same liability shift will affect gas stations, and fraudsters will have to find another scheme.

Faulty Chips

The chips embedded in today's credit cards use technology that is at least 20 years old, which means that it's refined, but not perfect. While these chips have proven remarkably durable when faced with moisture, impacts, and even extreme temperatures, they do have one flaw that has become noticeable. In many cases, the adhesives that affix the chips themselves to the credit cards has not been durable enough to withstand consumer's use. When some cardholders reach for their cards, they may find that the chips themselves have dislodged, rendering the card unusable as chip enabled card readers won't allow use of a card's magnetic strip if the card also has a chip. And while card issuers will replace the card at no cost to their customers, this can be an inconvenience. But in the future, we can expect this problem to go away as the industry starts using more durable adhesives.

Bottom Line

While chip enabled credit cards are a step forward, they are not perfect. By understanding their limitations, and patiently waiting for refinements, credit card users can enjoy enhanced security, albeit at the occasional expense of some convenience.


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