EMV vs Magnetic Stripe Cards

When dealing with payment systems, you will probably come across terms like EMV, chips, and other related terms. However, not many people are familiar with these terms. It leaves a lot of questions when you look at it, but a little research will clear the air. Now, if you want to protect your business and keep your customer’s information safe, you will need to understand what EMV and Magnetic Stripe Payments are about.

Many people wonder what makes EMV chip cards better than Magnetic Stripe cards. However, you can only truly decide if you understand what each payment system is and the effect of using them. It is essential that you know the difference between the two as their differences go beyond the way customers use these cards.

Magstripe Technology and Its Impact

Magnetic stripe cards are one of the oldest forms of credit card technology and have been around for up to 50 years. This payment system evolved from its traditional method of using plastic tape for magnetic recording of information. This was a technology used during World War II.

The magnetic stripe cards we know today are the regular credit cards referred to as swipe cards or magstripe cards. The stripe can be found at the back of the card, and it has magnetic particles that can transmit data between the credit card terminal and the strip. So when the card is swiped, it sends a request for authorisation to the cardholder and then the card issuer. Once the approval is given, the transaction is completed. The magstripe is a static storage device, and it contains very confidential information about the cardholder’s account.

Pros and Cons of Magnetic Stripe

There are some benefits and drawbacks of using magnetic stripe payment cards, and let’s see if the pros outweigh the cons or if it is the other way around.

Pros

Fast and Easy Process

The magnetic stripe cards are the easiest to work with, as all you need is to swipe. It takes a very short time to complete a transaction, and all that is required is that the magnetic fields match the bank account information. The reason why many customers and merchants liked using the magstripe cards was that it had less bureaucracy or administrative processes.

Cons

Exposure to Fraud

Although the transaction is very fast to complete, the major challenge with magnetic stripe payment is that it does not keep customers’ data safe. When a customer swipes the card, the data goes straight into the merchant’s transaction list. This means that anyone can have access to sensitive customer information and use it for fraudulent purposes. The worst part about this problem is that even if the cardholder reports fraud, it is almost impossible to trace where the breach took place.

More Costs on the Merchants

The risk involved in the magstripe cards also affects the merchant as they end up paying higher credit card fees for transactions completed using this payment method. Payment processors will charge more for the risk.

All About EMV

Credit and debit cards commonly used today come under EMV cards. These cards use a microchip as opposed to a plastic stripe. The EMV cards are managed by MasterCard, American Express, Visa, UnionPay, Discover, and JCB. The microchip uses a code, so it is practically impossible for fraudulent persons to gain access to the cardholder’s information.

Even if there is a suspicion of fraud, the charges are easier to identify and isolate. The microchip cards do a better job of protecting data, and since a unique code is generated for each transaction, it can’t be used again.

Pros and Cons of EMV

Let’s take a look at the pros and cons of using these microchip cards:

Pros

Fewer Chargebacks

One of the benefits merchants get from microchip cards is that there are very few charge disputes. There is better security on this type of card which will prevent chargeback fraud.

Cost-Effective

Merchants won’t pay more on processing fees and can save money instead. The fees are much lower when compared to magstripe payments.

Better Customer Service

You build trust with your customers when they know their information is safe.

Cons

Not All Stores Accept EMV

It may be difficult to pay for items as not all businesses use EMV. Customers will have to opt for the magstripe cards if the merchant can’t accept the EMV cards.

EMV Cards Have Limitations

Not all EMV cards function the same way. Some microchip cards may have a no PIN or tap system. This type of payment method is usually the least safe of the EMV payments.

What Is Better for Business?

Over time, EMV cards have proven to be the best technology for payments. They are not vulnerable to fraud, and the card is encoded for each transaction. You would need to use a PIN or some signature to process payments. The Magnetic stripe payments, however, are not safe. Anyone using them will be exposing confidential data like the card number, card expiry date, country, and cardholder’s name. It will be very easy for criminals to gain access to this information for malicious purposes.

Bottom Line

Choosing between EMV payments and Magstripes isn’t a tough decision to make at all. The difference is clear, and the EMV payments will win anytime. Being able to protect your customers from fraud is one way to keep them coming back. Magstripe cards may be much easier to process payments, but the risks outweigh the benefits. Even though they were the only available option in the past, it is a good thing we now have EMV cards that address the flaws of Magstripe. EMV technology is the best solution for modern-day transactions. Safety trumps it all and the EMV cards are a better option. If you haven’t migrated to EMV cards or your business is not yet EMV compliant? We recommend you do so today and enjoy the benefits of using this payment method.