What does EMV chip and PIN protect against?
EMV chip and PIN protects card-present payments against counterfeit and stolen cards. The chip creates a one-time cryptogram for each payment, so copied data cannot be reused, and the PIN proves the cardholder is present. It does not protect card-not-present payments, where no chip is read.
In detail
EMV chip and PIN protects card-present payments against two kinds of fraud: counterfeit cards and lost or stolen cards. EMV is the chip standard managed by EMVCo and used by all major card schemes.
How it works
- The chip: for each payment, it creates a one-time cryptogram that the issuer verifies. Data copied from one transaction cannot be replayed at another terminal, which defeats cloned magnetic stripes.
- The PIN: it proves that the person holding the card is the cardholder. Contactless payments replace it with amount limits, and wallets with a fingerprint or face check.
What it does not cover
Chip and PIN does nothing for card-not-present payments, because no chip is read online or by phone. That is why fraud moved to remote channels as chip spread, and why 3-D Secure exists. It also offers less protection when a terminal falls back to the magnetic stripe or to manual key entry.
See Card-Present vs Card-Not-Present for the full comparison, and in-store payments and Matcher™ for how terminal transactions are reported in NORBr.