What is EMV?What is “Chip” Technology & How Does It Work?

What is EMV Technology? Definition, Uses, Examples, & More

In the 1990s, three global card networks — EuroPay, Visa, and Mastercard — convened to develop a suite of microchip-based payment technologies. The aim of the new standard, known as “EMV” technology, was to replace magnetic stripe technology, which was then the dominant way information was stored on payment cards.

Magstripe technology was more convenient than old-school card imprinters. But, it had a major security flaw: they encoded static information, which meant that card data could easily be duplicated by bad actors and used for unauthorized purchases.

Three decades on, and EMV chip-based cards have successfully replaced magstripe cards as the most common way to relay payment information. According to EMVCo, the global organization that manages the technical standard, 70.4% of cards issued today use EMV chips, including 90.9% in the United States.

What is EMV?

EMV

[noun]/ē • em • vē/

“EMV,” an acronym that stands for “EuroPay, Mastercard, and Visa,” refers to a technical standard for smart chip-based debit and credit cards. It also commonly refers to chip-enabled cards that use this technology.

EMV chip cards contain a small, metallic microchip on the front of the card that encodes encrypted details about the payment method, like the card number and expiration date.

Unlike magnetic stripe technology, which stores card details as static values, EMV chips generate dynamic, single-use transaction codes. This makes it harder for fraudsters to steal sensitive card data by cloning the microchip, which helps prevent card-present fraud.

EMV Technology vs. Magnetic Stripe: What’s the Difference?

In practice, the key difference between EMV and magnetic stripe technology is who bears liability for fraud. Before 2015, issuers were held responsible for card-present fraud. Now, though, some liability falls on merchants:

Who is Liable for Card-Present Fraud

This has resulted in a substantial decline in card-present fraud. 2025 data from the Federal Reserve Bank of Kansas City reveals that, as a result of both EMV technology and the more recent EMV liability shift in 2015, “card-present fraud loss rates for both issuers and merchants have declined for single-message networks.”

Other key points of comparison between EMV and magstripe include:

Security Feature	EMV Chip	Magnetic Stripe
Data Storage	Dynamic data generated per transaction	Static data, the same every time
Encryption	Encrypted transaction data	No encryption
Authentication	Cardholder verification supported (PIN, signature, contactless)	Often relies on signature only
Fraud Resistance	High resistance to cloning and skimming	Vulnerable to cloning/skimming
Transaction Security	Unique cryptogram per transaction	Predictable, reusable data
Global Adoption	Widely adopted in fraud-prone environments (e.g., EU, Canada)	Phasing out in many countries
Liability Shift (Post-EMV Rollout)	Liability for fraud shifts to merchants if EMV is not supported	Higher fraud liability for merchants and issuers
Offline Capability	Can perform offline authentication securely	Relies entirely on network verification
Data Tampering	Tamper-resistant chip with secure element	Easily altered if physical access is gained

How EMV Technology Works

At the heart of EMV technology are metallic microchips, which store payment details in an encrypted fashion.

To pay with an EMV card, a cardholder inserts their payment method into an EMV-enabled chip reader. Once the card comes into contact with a reader, the buyer may be asked to enter a PIN or draw a signature to prove that they are the legitimate cardholder.

If the cardholder completes the authentication challenge successfully, the chip transmits a one-time code (called a cryptogram or payment token) that is relayed by the payment terminal to the cardholder’s issuing bank via the merchant’s payment processor.

How EMV Technology Works

• EMV card is inserted into the terminal (or tapped for contactless payment).
• Terminal sends a challenge to the chip card.
• Chip card responds with cryptogram.
• When prompted, cardholder enters PIN or signature.
• Terminal packages encrypted transaction data and transmits to issuer.
• Issuer checks cryptogram’s validity against expected value.
• Issuer transmits approval response back to processor.
• Merchant receives approval response and completes transaction.

The use of a dynamic cryptogram makes EMV technology more secure than the magnetic stripe technology it sought to replace. While magstripes transmit actual card information to the issuer directly, an EMV chip’s use of one-time code obscures the cardholder’s real details, protecting them from falling into the hands of bad actors.

The dynamic nature of the payment tokens relayed by chip cards is also an intentional security feature. Because each code is different, fraudsters who manage to intercept one token cannot reuse it in subsequent transactions. This contains the damage that unauthorized users can do via card-present fraud tactics like EMV chip shimming.

Benefits of EMV

EMV-enabled cards are now the global standard for good reason: they come with compelling benefits for both merchants and cardholders. Merchants who accept EMV cards can stand to gain via:

EMV Compliance & Requirements for Merchants

For merchants, becoming EMV compliant means accepting transactions using EMV-compatible payment terminals. In practice, this means that sellers will need to decommission their legacy, magstripe-only terminals, and upgrade to EMV-compliant hardware and software (if they haven’t already done so).

Merchants can take the following steps to help ensure compliance:

Common EMV Implementation Challenges

Supporting EMV chip cards has its benefits. But, we’ll also be the first to admit that EMV implementation is not painless. Challenges include:

The Future of EMV & Payment Security

EMV will soon go from becoming the dominant standard to being the only supported payment technology.

For instance, Mastercard says that the “magnetic stripe will start to disappear in 2024 from Mastercard payment cards in regions, such as Europe, where chip cards are already widely used. Banks in the US will no longer be required to issue chip cards with a magnetic stripe, starting in 2027.”

By 2029, Mastercard will no longer feature cards with magnetic stripe globally, and by 2033, the magstripe will be phased out entirely.

Visa, meanwhile, plans to eliminate magnetic stripe cards in the United States 2027. The card network similarly expects to make magstipes fully obsolete worldwide by 2033.

This gives merchants, at the time of this writing, just a few years to start to support EMV-enabled payments, if they haven’t already done so.

Of course, the card security landscape is far from static. New technologies like biometric payments, which are already a staple of mobile wallet technology, may continue to gain traction as hardware like palm and iris scanners allow cardholders to authenticate in-person transactions using inherence factors. Payment tokens, which underlies EMV technology, may also find use cases in adjacent domains, such as ticketing, real-time payments, subscription billing, investments, and more.

Curious about how EMV technology or the EMV liability shift could impact your exposure to post-transaction fraud? Get in touch with our experts for a free, no-obligation chargeback analysis today.