What Is a Chip-and-PIN Card?
A chip-and-PIN card, often referred to as an EMV card (named after Europay, Mastercard, and Visa), is a payment card that contains an embedded microchip capable of performing secure computations. Unlike older magnetic stripe cards, which simply stored static data, chip cards actively participate in each transaction.
This shift from passive storage to active processing is what makes chip cards significantly more secure. Rather than exposing card details directly, the chip behaves like a tiny computer that communicates with the payment terminal and your bank to verify each purchase.
Power Without a Battery
One of the most surprising aspects of chip cards is that they do not contain a battery. Despite this, they are still able to perform complex cryptographic operations. This is possible because the card is only powered when it is in use.
When inserted into a terminal, electrical contacts on the card connect to the reader, supplying just enough power for the chip to operate. For contactless payments, the terminal emits a short-range electromagnetic field. The card’s internal antenna captures this energy and converts it into power, allowing the chip to briefly activate.
Because of this design, the card remains completely inert when not in use, which improves both durability and security.
Inside the Card
Although it looks simple, the chip inside your card is a highly specialised secure device. It contains a microprocessor, secure memory, and dedicated cryptographic hardware. These components are designed to resist tampering and prevent sensitive data from being extracted.
The chip stores key information such as encrypted account details and secret cryptographic keys. These keys never leave the card. Instead, they are used internally to prove to the bank that the card is genuine.
In contactless cards, a thin antenna is embedded around the edge of the card. This antenna enables communication with payment terminals using near-field communication (NFC), allowing transactions to occur without physical contact.
How a Transaction Works
When you make a payment, a carefully designed sequence of steps takes place in just a few seconds. First, the card and terminal establish a connection, either through physical contact or via radio signals. The terminal then requests information from the chip.
Instead of simply sending stored data, the chip generates a unique cryptographic response. This response is created using secret keys stored securely inside the card and includes details specific to that transaction, such as the amount and a random number.
If the transaction requires verification, you enter your PIN. The chip can check this PIN locally, meaning it does not need to send your PIN across the network. This reduces the risk of interception.
The terminal then forwards the transaction data to the bank, which verifies the cryptographic response and checks whether the transaction should be approved. The result is sent back almost instantly.
Diagram: Payment Flow
Why Chip Cards Are More Secure
The defining security feature of chip cards is their use of dynamic cryptography. Each transaction produces a one-time code that cannot be reused. Even if someone were able to intercept the data, it would be useless for future transactions.
This is a major improvement over magnetic stripe cards, which relied on fixed data that could be copied and reused. By contrast, chip cards make cloning extremely difficult because the secret keys never leave the chip and cannot be replicated.
Additionally, the chip is designed to resist physical tampering. Attempts to probe or modify it typically result in the chip shutting down or destroying sensitive data.
Contact vs Contactless Payments
Chip-and-PIN (contact) transactions involve inserting the card into a reader and entering a PIN for verification. This method is commonly used for higher-value payments and provides strong authentication.
Contactless payments, on the other hand, use short-range radio communication. For small purchases, a PIN is often not required, making the process faster and more convenient. Despite this convenience, the same underlying cryptographic protections are still in place.
Do Any Cards Use Batteries?
Standard payment cards do not include batteries, but there are some experimental and specialised designs that do. These may include cards with small displays for generating one-time passcodes or biometric cards with fingerprint sensors.
However, these are not widely used in everyday banking. The vast majority of cards rely entirely on external power from the terminal, keeping them simple, thin, and long-lasting.