Integrated Circuit Card

What Is an Integrated Circuit Card?

An integrated circuit card, or chip card, is a payment card that uses an embedded microchip to store data in addition to (or instead of) a traditional magnetic stripe. Integrated circuit cards are made of plastic or a similar material and are most often associated with specific credit cards known as EMV or chip-&-pin credit and debit cards.

Understanding an Integrated Circuit Card

Integrated circuit cards allow the storage of information on the card itself. A consumer's information is accessed when the payment card is used in a card reader. Combined with other security measures such as a PIN or password, the chip allows the secure transmission of personal and financial information.

EMVCo manages the technology standards behind integrated circuit payment cards. These types of cards are also known as "smart cards" due to their integrated circuit chip. Though they were initially used in Europe and Asia, their use has spread to the United States. EMV has become a standard in payment card security technology and has been deployed by financial institutions such as banks and credit card providers.

While integrated circuit cards are often associated with credit and debit cards, they are also used in a variety of other settings. For example, employees may be assigned an identification card that they must scan in order to be allowed inside a secure building.

How Integrated Circuit Cards Are Used to Combat Identity Theft

Magnetic stripe cards have been frequently duplicated, allowing identity thieves to create copies of the original card, as well as sell the account information they have illegally accessed. The use of the embedded chip in a payment card can reduce such fraud as it makes skimming a less effective means of accessing account information.

Transactions with an integrated circuit card require the chip to be inserted into the chip reader, where available, thus making the magnetic stripe a backup feature to be used only when a chip reader is not available. Since fraudsters cannot access the information secured by integrated circuit cards as easily as a magnetic stripe, they're not able to authenticate their illicit transactions. Many integrated circuit cards also have a contactless payment method, whereby the chip can be read over a short distance, further avoiding the use of a magnetic stripe.

As a result of this anti-theft technology, integrated circuit cards are seeing more use at retail locations as more chip readers are introduced to accommodate this form of payment security. The cards typically include a magnetic stripe as well to allow transactions to be completed if a chip reader is not available at a retailer's store.