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Why Are Some EMV Cards Chip and Pin, and Some Chip and Signature?

In 2015, the United States officially joins the rest of the world in making EMVs the default payment standard for in-store credit card purchases. These more secure chip-enabled cards are quickly phasing out older swipe-and-sign plastic — and they come in two different varieties:

  • Chip-and-signature — EMVs in which customers sign their name in order to complete a transaction.
  • Chip-and-PIN — EMVs that require a personal identification number (PIN) to complete payment.

Between these two competing card verification methods (CVMs), the PIN offers much greater protection against in-store fraud. Whereas signatures are relatively easy to forge, only the cardholder has access to his/her four-digit personal identification number.

Why do credit card issuers and merchants even bother with less secure chip-and-signature EMVs?

Why Have Both Chip and Signature and Chip and PIN?

In most parts of the world, chip-and-PIN is the official standard. EU credit card readers can still process and accept signature payments. Though nearly all card issuers provide their customers with PIN-enabled plastic — and most terminals automatically come with keypads.

In the U.S., however, chip-and-PIN adoption is not nearly as universal.

There are several reasons why American card issuers and merchants overwhelmingly prefer chip-and-signature EMVs:

1. Costly Upgrades

Moving from legacy terminals to EMVs is an expensive transition, with some experts predicting U.S. merchants will have to spend billions of dollars updating their payment infrastructure. When shopping for EMV-ready readers, terminals without keypads tend to be more affordable than those requiring a PIN.

2. Resistance to Change

Another reason is that merchants and card issuers don’t want to force consumers to change their shopping habits. Most customers are accustomed to swipe-and-sign transactions. Requiring shoppers to remember an extra four-digit code could chase away potential sales.

According to Jon Krauss of Discover, chip-and-signature is already “such a big shift that we didn’t want to make it more difficult than it already will be.”

Given America's reluctance to adopt the metric system, there may be some merit to this argument, but educating consumers isn't really that difficult. Apple Pay was a radical departure from tradition, and yet, consumer purchases using this contactless payment method are through the roof.

3. Lost Profits

Arguably the biggest factor is lost profit potential — at least for credit card issuers. This is because chip-and-PIN purchases carry lower interchange fees than chip-and-signature transactions. Although the risk of fraud is a little bit higher, the extra revenue generated is incentive enough to keep signature verification in circulation.

Which Types of EMVs Should You Accept?

As a retail merchant, you don't really have to choose between chip-and-signature and chip-and-PIN. With the right terminal and merchant account, you can process both types of EMVs in your store.

For tips on getting started, schedule a free appointment with BluePay's EMV credit card processing team today.

Topics: EMV

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