Chip Credit Cards: Benefits & How EMV Cards Work in Retail

Chip cards are becoming the payment processing standard. Whether online or in person, here’s what merchants need to know about accepting chip card payments.

There’s no shortage of ways customers can pay for goods and services today. While other payment methods like digital wallets, mobile payments, and NFC transactions are all widely used, using a chip card for transactions comes with its own set of upsides. 

Initially launched in 1996 by Europay, Mastercard, and Visa, EMV cards, or “chip cards,” provide users an additional way to secure their funds and card transactions. 

To learn the ins and outs of the features that come together to make a chip card work, here’s a walk-through of everything worth knowing about the payment technology. 

What is a chip credit card?

A chip card, often known as an EMV or smart card, is a debit or credit card designed with a microchip as well as a magnetic stripe. The card’s chip contains microprocessors equipped to communicate data safely. 

The chip provides an additional layer of security—especially for physical transactions in public spaces like stores and ATMs. It provides an encrypted way for payment processors to verify cardholder information.

Types of EMV cards

Chip-and-pin cards

Chip-and-pin cards require the cardholder to create a PIN (Personal Identification Number) and enter it at the point of sale (POS) to authorize a purchase. The PIN number adds an extra security layer by verifying that the person using the card is its rightful owner. The payment can’t proceed without the cardholder entering a PIN that matches the one associated with the card. 

Chip-and-signature cards

With a chip-and-signature card, the cardholder signs for the purchase to verify their identity. The signature is compared with the one stored in the credit card issuers’ system or with the signature on the back of the card. If it’s a match, the transaction is typically approved. If not, then the transaction is declined.

How does chip card technology work? 

For a chip card to work, you’ll need a payment acceptance device that’s certified with PIN and chip standards. Once the consumer inserts their chip card to make a payment, the chip and the card reader exchange information to authenticate the transaction and either approve or decline it. 

Chip cards vs. magnetic stripe

An EMV chip card is safer than magnetic stripe cards. A card with a magnetic stripe only stores static information, which means your information stays the same with every transaction. This feature makes magnetic stripe cards easier to scam. Fraudsters can pick up personal information from magnetic stripe cards and make illegal copies of it to access funds. 

A chip card, however, stores a digital code containing your information that changes with every transaction, making it harder for scammers to steal your data. The technology they would need to pull off copying your EMV chip card data is complex and costly. In other words, it’s not worth the effort. 

According to Mastercard, no credit or debit cards will have a magnetic stripe starting in 2033. By then, most businesses will have ample time to replace their systems to be chip-card-friendly. 

How to accept EMV card payments in your store

1. Choose a POS system

A point-of-sale (POS) system with built-in EMV chip technology is a must-have for a business that wants to complete safe transactions with ease. 

POS software can transform any of the following into a POS terminal:

• Tablets: Once you’ve installed POS software on a tablet, merchants can safely process transactions, keep track of inventory, and search for customer profiles. 
• EMV card readers: Card readers are a payment portal that reads card information to complete transactions. Some of the newer versions can both take card payments and complete contactless transactions. 

Skip the headaches and choose Shopify POS to run your retail stores. Shopify instantly pulls your product catalog and customers from Shopify admin. This makes it easier than ever to get set up, start selling in-person, and your whole business from a single platform for unified commerce.

2. Assemble your hardware

The more steps you can eliminate during a chip card transaction, the better. For that reason, it’s recommended that merchants use hardware with customer-facing displays. 

However, because of innovation, using a clunky multi-device setup to accept transactions is no longer necessary. To accept chip card payments safely, you can either install secure POS hardware or download POS software onto an existing device, including tablets. 

Hardware prices vary wildly, so you’ll want to compare and contrast features to find your best option. In the long term, it’s helpful to stick with a payment system that offers an ecosystem of integrated payment options. 

For example, Shopify’s POS system can either be downloaded as software on an existing device, or you can opt for a card reader, all of which function seamlessly with your Shopify ecosystem of retail tools.

💡 PRO TIP: If you want to open a temporary retail location like a pop-up shop or sell at an event, you don’t need to buy your hardware. Sign up for Shopify’s Hardware Rental Program to start selling quickly risk-free.

3. Find a payment processor

A payment processor is the system that lets you accept payments from customers. Yours must integrate with your POS system and offer features like: 

• Multiple payment methods
• International payment support
• Tokenization services
• Integrations
• Security features
• Costs and fees
• Knowledgeable and available customer support

Shopify Payments consolidates payment processing, order management, and analytics into one system, lets you sell in different currencies, and accepts a wide variety of payment methods. It comes automatically set up in Shopify, so you won’t need to set up a third-party merchant account or third-party payment provider when taking physical payments.

4. Evaluate EMV payment processing costs 

Payment processors have different pricing models and card processing fee structures. Most charge an average of 2.4% of the transaction value, which can be monthly fees, flat per-transaction fees, and percentage-based commissions, or a mix of these. 

Processors might also apply a small fee based on the industry, processing volume, average ticket size, and processing history. 

Explore your options to find out the costs associated with specific transaction types and consider the added value each processor offers. Then, compare quotes to narrow your choices and request a contract from the processor that best suits your business needs. 

If possible, have your legal counsel review the contract, looking for binding language, automatic-renewal clauses, early-termination fees, and any hidden charges. The application may be included in the contract, so only fill it out when you are ready to commit to the company’s services.

Benefits of chip credit cards

Contactless transactions

The onset of a worldwide pandemic highlighted the efficiency and need for a contactless way to complete payments. Chip cards fulfill that need—and customers are still using them to complete in person transactions. 

A chip card streamlines the payment process and can complete transactions in less time with contactless payment technology. 

Availability 

Chip card technology is already being used widely with nearly 13 billion EMV chip cards in global circulation, accounting for more than 70% of issued cards worldwide. So, it’s not new technology that you have to convince customers to pay with. After all, 70% of people use card payments more often over cash because they offer a safer, faster, and more convenient way to pay.

Better security

Security is always a concern with financial transactions, regardless of what form they’re accepted in. EMV chip cards come with an added layer of security that makes purchases at a terminal less prone to fraud, while giving cardholders and merchants peace of mind. 

EMV and credit card fraud 

EMV chips hold the cardholder data necessary for chip-approved devices to read. This works as a way to prevent counterfeit fraud, which has declined by as much as 76% since chip technology was widely implemented in 2011, according to Visa.

But while EMV chip cards have proven to be more secure, chip card fraud still happens. Scammers can still use a skimming device to copy your card information from the magnetic stripe—as chip cards still come with that stripe. The caveat is that copied information from a chip card’s magnetic stripe can’t be used at any other terminal unless the chip is present or copied with it. 

Near-field communication transactions

Near-field communication, or NFC for short, is a wireless method of reading card information to complete a transaction. 

Chip cards that are enabled for NFC transactions can also be vulnerable to fraudulent card skimming devices if they’re close enough in range to read the data encrypted in the chip. Though this is less common, it’s still a vulnerability that comes with NFC-enabled transactions. 

Card present transactions

Card-present transactions happen when a scammer pays by presenting a physical counterfeit or stolen credit card. While this type of card fraud still happens, it’s becoming less common due to a massive shift to online payment transactions. 

One way to lessen card-present transactions is by requiring cashiers to ask the consumer for a valid ID along with the card. To check for counterfeit cards, cashiers can also be instructed to check for the first few digits of a card’s number. Each card issuer always starts their card with a specific set of numbers. 

Card not present transactions

Card-not-present transactions make it possible to complete purchases over the phone, by internet, and even through the mail. Card-not-present transactions don’t require your physical presence to swipe or insert your card. This is how automated payments for services like subscriptions can get paid without your assistance. 

However, card-not-present transactions are also prone to fraudulent activity. A recent report shows card not present fraud accounted for eight in 10 of all fraud losses in the retail sector, amounting to over $4.5 billion.

Once a scammer gets their hands on a customer’s payment information, including their billing address and CVV PIN, they can make purchases without the merchant being able to verify if the information is their own. 

Leaders in the financial space predict fingerprinting card technology will soon be implemented to decrease fraudulent transactions. Until then, there’s plenty both merchants and consumers can do to minimize the risk of fraud:

• Upgrade your terminals with better hardware or a better POS system
• Incorporate an AVS (address verification service) for card-not-present transactions
• Provide employees with adequate training on completing transactions
• Require customers to provide their CVV number at checkout
• Only use approved equipment

Consumers can further safeguard their card information by:

• Only using ATMs that are closely monitored
• If available, set up transaction alerts with their bank or credit card provider
• Opt for make mobile payments (its tokenization security features are even more robust)

Easily accept EMV cards at your store

Chip cards are here to stay, as it’s only a matter of years before magnetic stripe cards become completely obsolete. If you’re opening a retail store or thinking of upgrading your hardware, ensuring you upgrade to an EMV chip card qualified device is the way to go. 

Shopify comes with POS software and hardware to get you up and running, no matter how many retail stores you’re operating. Each integrates with Shopify’s ecommerce platform, allowing you to take payments from anyone, anywhere.

Chip credit card FAQ

Do all credit cards have a chip now?

Not every credit card comes with an EMV chip. Some older cards might lack this feature, but many banks and financial institutions are now issuing new cards with chip technology.

Are chip credit cards safe?

Chip credit cards are secure. The chip technology helps combat fraud by making it difficult for thieves to forge cards. During chip card transactions, the chip generates a unique code that is valid only for that purchase, making it hard for thieves to reuse your card details.

How do I know if my credit card has a chip?

Check for a metallic square chip embedded on the front side of your credit card on the same side as the card number and expiration date.

Is tap safer than chip?

Tap-to-pay is more secure as it uses NFC technology with encryption protocols, which ensures the security of transmitted data and makes it hard for attackers to intercept or manipulate it for fraudulent activities. Tap-to-pay transactions also occur over a shorter distance than swiping a chip card and reveal less customer information, such as their identity and card number.