What is an integrated circuit card?
An integrated circuit card, or smart 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 called EMV or chip and PIN credit and debit cards.
Key points to remember
- Integrated circuit cards contain a microchip that stores cardholder information, the most common being EMV or chip and PIN credit or debit cards.
- Integrated circuit cards are primarily used in credit cards and debit cards, but are frequently used in other contexts, such as employee identification cards.
- These cards are a deterrent against identity theft because they avoid using a card’s magnetic stripe, which increases the ease of data skimming for identity thieves.
Understanding an integrated circuit card
Integrated circuit cards allow the storage of information on the card itself. A consumer’s information is accessible when the payment card is used in a card reader. Combined with other security measures such as a PIN or password, the chip enables the secure transmission of personal and financial information.
EMVCo manages the technological standards for integrated circuit payment cards. These types of cards are also called “smart cards” because of their integrated circuit chip. Although 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 IC cards are often associated with credit and debit cards, they are also used in a variety of other contexts. For example, employees may be assigned an ID card which they must scan in order to be admitted inside a secure building.
How Integrated Circuit Cards Are Used to Fight Identity Theft
Magnetic stripe cards were frequently duplicated, allowing identity thieves to create copies of the original card, as well as sell account information they illegally accessed. Using the chip embedded in a payment card can reduce such fraud because it makes skimming a less efficient way to access account information.
Transactions with an integrated circuit card require the chip to be inserted into the chip reader, if present, thus making the magnetic stripe a fallback function to be used only when a chip reader is not available. Since fraudsters do not have access to information secured by integrated circuit cards as easily as a magnetic stripe, they are unable to authenticate their illicit transactions. Many IC 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.
Due to this anti-theft technology, IC cards are increasingly used at point of sale as more and more chip readers are introduced to support this form of payment security. Cards typically also include a magnetic stripe to allow transactions to be completed if a chip reader is not available in a retailer’s store.