Credit Card part III - EMV CHIP, EMV Contact Less, Magnetic Stripe AND NFC

EMV CHIP, EMV Contact Less, Magnetic Stripe AND NFC

What is the EMV Chip?

EMV stands for Europay, MasterCard, and Visa. It is a global standard for credit and debit cards with chip-based technology.

The EMV chip is a small, square microprocessor embedded in a card. Unlike the magnetic stripe, the chip uses secure encryption to store and process data.

How does it work?

• When you use a card with an EMV chip, the chip generates a unique code for each transaction.
• The chip is difficult to clone, as it uses dynamic encryption. This means each time the card is used, a different cryptogram (transaction code) is generated, making it harder for fraudsters to copy or steal card information.

Key Features of EMV Chip:

• Security: The chip provides better security because it uses encryption and generates a unique transaction code, reducing the risk of fraud.
• Authentication: The chip is used in "chip-and-PIN" or "chip-and-signature" systems. You can be asked to enter a PIN or provide a signature to verify the transaction.

Magnetic Stripe

What is the Magnetic Stripe?

• The magnetic stripe (or magstripe) is the black or brown strip on the back of a card that contains encoded data about the cardholder and the card itself.
• It stores static information, such as the card number, expiration date, and account information, and is read by a magnetic reader when swiped through a card terminal.

How does it work?

• The data on the stripe is static, meaning the same information is used every time the card is swiped.
• The magnetic stripe is easily copied, which makes it more vulnerable to fraud and card skimming.

Key Differences Between EMV Chip and Magnetic Stripe

Feature	EMV Chip	Magnetic Stripe
Security	High security due to encryption and dynamic data generation	Low security with static data vulnerable to skimming
Transaction Process	Chip generates a unique transaction code for each purchase	Static magnetic data used for every transaction
Usage	Used in chip-enabled terminals (contact or contactless)	Used in swipe-only terminals
Technology	Integrated circuit (IC) with advanced encryption	Magnetic stripe with no encryption or dynamic data
Acceptance	Widely accepted globally, especially in countries using EMV technology	Accepted in older payment systems but becoming less common
Fraud Protection	Higher fraud protection due to dynamic data and encryption	Vulnerable to cloning and fraud due to unencrypted static data
Cost	Higher cost due to more complex technology and security features	Lower cost as it uses simpler technology

Summary:

• EMV Chip cards provide enhanced security, using encryption and generating unique transaction codes to prevent fraud.
• Magnetic Stripe cards are older and less secure, as they store static information that can be easily copied or cloned by fraudsters.

As the financial industry continues to move towards chip-based (EMV) cards for better security, magnetic stripe cards are gradually being phased out in many countries. However, magnetic stripe cards are still widely accepted in many places, especially where older infrastructure exists.

Are the EMV chip and SIM card chip the same? Do they serve the same purpose of encryption?

The purpose of both is to store data, but technically, they are very different.

EMV Chip

• Uses asymmetric cryptography for data encryption and authentication.
• When you insert your EMV card into a terminal, it generates dynamic encryption keys for each transaction, making it fraud-resistant.
• EMV chips use Public Key Infrastructure (PKI), digital signatures, and secure elements (SE) to protect transaction data.

SIM Card:

• Uses symmetric encryption for network authentication and data security.
• A SIM card authenticates the mobile device to the cellular network by storing a secret key known only to the carrier. This key is used to create a unique authentication token that is sent to the network.
• SIM cards use Triple DES (3DES) or AES (Advanced Encryption Standard) encryption for secure communication with the network.

If you want complete details, let me know in the comments, and I will add a post on this. However, in payment gateways, we don't need to understand this difference in detail.

Question: Is the EMV chip readable if the card is expired?

The EMV chip stores information like the card number, expiration date, cryptographic keys, and other security-related data.

Expiration is primarily a date-related restriction for the card's validity, not a technical limitation on the chip itself.

Question: Can the Chip Be Read After Expiry?

The chip can still be read by card readers after the card has expired, as the data stored on it doesn’t automatically become unreadable.

However, expiration simply means that the cardholder can no longer use the card for transactions after the expiry date. The issuer (bank) may block transactions for expired cards, even though the chip is technically still readable

Question: What Happens When You Try to Use an Expired Card?

Card readers or payment terminals can still read the EMV chip data (card number, expiration date, etc.) from the card.

Transaction failure: When a transaction is attempted, the expiration date will be checked by the card issuer’s authorization system. If the card has expired, the issuer will decline the transaction, even if the chip is readable.

EMV Contact Less

EMV Contactless is a type of payment technology that allows transactions to be made without physically inserting or swiping a card. Instead, the cardholder simply taps or waves their card near a compatible reader. This technology is based on EMV (Europay, Mastercard, and Visa) standards and provides secure, fast payments.

Key features of EMV Contactless include:

1. No Physical Contact: The card uses radio-frequency identification (RFID) or Near Field Communication (NFC) to communicate with the payment terminal.
2. Fast Payments: Transactions are quicker, making it ideal for small purchases and helping reduce wait times at checkout.
3. Short Range: The card and terminal need to be close (usually within 4 cm or about 1.5 inches) for the transaction to happen.

For small transactions, no PIN or signature is typically required, making the process even faster. However, for larger amounts, the terminal may ask for additional authentication, such as a PIN or signature, to complete the payment.

NFC (Near Field Communication)

NFC is a wireless communication technology that allows devices, such as smartphones, cards, or other devices, to communicate over short distances, typically within 10 cm or less.

EMV Wireless vs. NFC Wireless
Both EMV Wireless and NFC Wireless use short-range communication for contactless transactions, but they differ in their applications and the technology behind them. EMV Wireless is specifically used for secure payment transactions, while NFC Wireless is a more general-purpose technology, used for various applications like mobile payments, ticketing, and data sharing between devices.

Differences Between EMV Wireless and NFC Wireless

Feature	EMV Wireless	NFC Wireless
Technology Used	EMV Chip with RFID/NFC for secure payments	NFC technology for general short-range communication
Main Application	Secure contactless payments using payment cards	Various applications including payments, file transfer, device pairing, etc.
Devices Involved	EMV cards (payment cards)	Smartphones, smartwatches, EMV cards, etc.
Security	Uses dynamic cryptographic data for each transaction	Typically uses encryption but security varies depending on the application (e.g., payments vs. file transfers)
Range	Short-range, typically within a few centimeters	Similar range, typically within a few centimeters

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NFC (Near Field Communication) is a chip or hardware module found in devices like smartphones, tablets, and smartwatches. It lets these devices communicate wirelessly with other NFC-enabled devices or terminals over short distances, usually within 4 cm or less.

Question: Is there any limitation for wireless transactions in India?

Yes, according to RBI guidelines, contactless payments can be made for amounts up to ₹5,000 per transaction without requiring a PIN.