When it comes time to pay for our groceries, gas, meals or other daily needs, you probably reach for a credit or debit card to take care of those expenses. In a 2022 Pew Research poll about what payment method Americans use to make their purchases, 41% of respondents said none of their purchases in a typical week were paid with cash, up 12% from the last survey four years prior.
The convenience and security of credit and debit cards have made them a staple in our current financial state. While the card’s form has primarily stayed the same since its introduction to the mainstream, its interaction with payment systems has evolved. Over the last decade, our handy plastic cards slowly moved away from the magnetic stripe or “magstripe” swipe in favor of a “dip of the chip” or tap-to-pay.
Even if you’re a savvy card user, you may have wondered which payment method is more secure when you approach the counter to pay. Let’s look at how each transaction type works and answer the question, “Is tap-to-pay safer than chip payment?”
How Do Chip Readers Work?
The chip you see in your transaction cards today is an EMV® chip. This chip is based on guidelines set by EMVCo, a coalition of major card and transaction companies.
According to EMVCo, chip cards were available in the United States as early as the late 2000s.
However, they did not become the adopted standard in the United States until the fall of 2015. One article from the Congressional Research Service covering the transition stated that the EMV Chip was adopted due to a rise in fraudulent activity that took advantage of the less secure magstripe.
While you’ve probably used a chip for payment before, you may wonder how it works and keeps your transaction secure. Like magstripe cards, PIN chip cards require physical contact with the point-of-sale (POS) terminal to exchange payment information. The most common way to make contact is by inserting or dipping the card into the designated slot of the point-of-sale terminal.
Unlike a magstripe, the EMV chip standard added authenticity validation for every transaction, helping prevent the counterfeits created by cards that only used the magstripe. The data on an EMV chip card was more difficult to copy than from a magnetic stripe and usually required PIN input.
What Makes a Chip Reader Secure?
Two things that make chip cards a more secure option than their magstripe predecessors include:
- Personal Identification Number (PIN) Input: Chip cards combined with PINs add a layer of security to reduce the amount of fraudulent transactions made with a card at the point of sale.
- More Secure Data Storage: To meet EMVCo standards, payment card chips and terminals must employ specific standards to protect payment data before they can reach consumers. These security standards include hardware and software requirements on both the consumer and merchant sides.
Now that we’ve had a moment to dip into the world of EMV chips, let’s explore contactless payment and tap-to-pay.
How Does Tap-To-Pay Work?
Tap-to-pay is a transaction that uses Radio Frequency Identification (RFID) or Near Field Communication (NFC) technology to wirelessly transfer payment information from the card to the POS terminal. To complete a tap-to-pay transaction, you simply:
- Lower your card near the contactless payment signal, holding the chip near the reader.
- Hold your card near the reader while it exchanges payment information with the point-of-sale terminal.
- Listen for an alert or look for a visual cue that your transaction has been completed. Usually, you will see a flash of lights or hear a beep.
Why Is Tap-To-Pay More Secure?
Why is tap-to-pay considered more secure than other payment methods? Here are two security measures that tap-to-pay transactions utilize to help avoid payment fraud:
- Secure data storage via an EMV chip: Contactless payments are conducted through the same EMV chip you use for chip payments, meaning you can count on the same data security benefits that chip transactions have.
- Tokenized transactions: Tap-to-pay utilizes a security technique known as tokenization. Essentially, it is a security technique that replaces the sensitive payment information stored on your card with a random set of characters and numbers. The terminal can then read and process the token without exposing your information. Tokenization protects your information after you walk away from the store, unlike a magstripe, which exchanges your payment information without encryption.
So, is tap-to-pay safer than a chip?
While both payment methods are more secure than the magstripe swipe of old, we will give the edge to the tap-to-pay. The tokenization of your payment information makes it more difficult to obtain. This means you can have confidence when you make that quick tap at the counter before you head out the door.
Work with a Bank that Can Help You Pay Securely
Regardless of whether you dip your chip or tap to pay, always use a card backed by a bank that has appropriate security measures in place and allows you to regularly monitor your card spending and easily report potential fraudulent activity.
Community Point Bank offers secure payment methods and mobile banking options to help you stay on top of your transactions. Plus, we have a team ready to assist you with any problems you see with your account. If you’re ready to bank better, apply to open an account today!