The trouble is that not all financial institutions have properly set up their systems this way. If somehow these do not align for a given transaction type, the financial institution is supposed to decline the transaction. However, for EMV’s security protections to work, the back-end systems deployed by card-issuing financial institutions are supposed to check that when a chip card is dipped into a chip reader, only the iCVV is presented and conversely, that only the CVV is presented when the card is swiped.
The appeal of the EMV approach is that even if a skimmer or malware manages to intercept the transaction information when a chip card is dipped, the data is only valid for that one transaction and should not allow thieves to conduct fraudulent payments with it going forward. Both the iCVV and CVV values are unrelated to the three-digit security code that is visibly printed on the back of a card, which is used mainly for e-commerce transactions or for card verification over the phone. The iCVV differs from the card verification value (CVV) stored on the physical magnetic stripe, and protects against the copying of magnetic-stripe data from the chip and the use of that data to create counterfeit magnetic stripe cards. One of those is a component in the chip known as an integrated circuit card verification value or “iCVV” for short - also known as a “dynamic CVV.” This dual functionality also allows cardholders to swipe the stripe if for some reason the card’s chip or a merchant’s EMV-enabled terminal has malfunctioned.īut there are important differences between the cardholder data stored on EMV chips versus magnetic stripes. This is largely for reasons of backward compatibility since many merchants - particularly those in the United States - still have not fully implemented chip card readers. Virtually all chip-based cards still have much of the same data that’s stored in the chip encoded on a magnetic stripe on the back of the card. The technology causes a unique encryption key - referred to as a token or “cryptogram” - to be generated each time the chip card interacts with a chip-capable payment terminal. Newer, chip-based cards employ a technology known as EMV that encrypts the account data stored in the chip. That data can then be encoded onto anything else with a magnetic stripe and used to place fraudulent transactions. Traditional payment cards encode cardholder account data in plain text on a magnetic stripe, which can be read and recorded by skimming devices or malicious software surreptitiously installed in payment terminals.
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