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What the chip does

A small microchip is embedded into a debit or credit card and provides both highly secure memory and complex processing capabilities. The chip holds the same personal data as the magnetic stripe (e.g. cardholder name, card number and expiry date) but also adds a range of indicators and counters which reduce the opportunities for misuse of the card. Chip technology uses highly sophisticated processing to identify genuine cards and makes counterfeiting more complex and expensive; unlike a magnetic stripe card, the chip itself plays an active part in the decision to authorise a transaction.

Many credit and debit cards already carry a chip, which can be identified by the gold or silver coloured contact pad on the front left of the card. Chip technology provides the necessary foundation for using PIN as the method of identifying cardholders at point-of-sale.

Chip security systems are reviewed and updated regularly. The UK card industry maintains a multi-layered approach to security so that it is not reliant on any single system.