What does a chip card utilize in payment systems?

A chip card utilizes an integrated circuit for enhanced security, which is fundamental to its operation in payment systems. This integrated circuit, known as a microchip, stores and processes data securely and generates unique transaction codes for every payment made. This significantly reduces the risk of fraud, as the data cannot be easily replicated, unlike magnetic stripe cards that use static information.

The technology embedded in the chip card enhances the security by employing encryption and other security features that protect sensitive cardholder information. This makes chip cards more secure than older payment methods, which were more susceptible to skimming and cloning.

In comparative context, barcodes are typically used in different types of transactions, such as inventory management, and not specifically in chip cards as a form of payment. Similarly, while contactless payment features are available in many chip cards, they do not represent the core function of utilizing the chip technology itself. Finally, handwritten signatures are becoming less common in payment systems and do not provide the same level of security as chip technology, focusing instead on traditional authentication methods that lack the advanced protection found in chip-enabled transactions.