The Impact of Chip

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The Impact of Chip

• Graham Bond
• New Technologies Specialist
• Visa Inc.
• CardExpo West Africa 2009
• Lagos, Nigeria
• 17 June 2009

2
Agenda

• EMV
• Visa Smart Debit / Credit (VSDC)
• Features
• Impact on Fraud
• Multi-Application
• Contactless Payment

3
Banking Card Evolution

• Started 1950, used for payments Diners Club
• BankAmerica started 1958
• Initially used for ID
• Secured against forgery tampering
• Embossing tipping
• Holograms micro printing
• Invisible patterns using fluorescent fibres
• Signature panel

• Started 1992 (banking)
• Stores data on chip and magnetic stripes
• Allows maximum security cardholder verification
  and fraud prevention
• Need for global interoperability hence EMV

• Started 1970
• Stores data on magnetic stripes
• Allows automation minimises paper utilisation
• Now low security
• Data world readable/writable
• Card readers available for less than 40
• Skimming

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What is EMV?

• Global specification supporting smart card /
  terminal interoperability and transaction
  processing of credit and debit cards
• Non-competitive specification
• Developed by Europay, MasterCard and Visa (EMV)
  in 1994
• EMV Version 3.1.1 in 1998 EMV Version 4 in 2000
• EMV Version 4.2 since June 2008
• EMVCo LLC formed in April 1999
• Ownership and promotion of EMV specs
• Establish unified type approval
• Now owned by JCB, MasterCard, American Express
  and Visa

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EMV and its Purpose

• EMV provides international interoperability for
  chip-based credit and debit
• Set of functions for
• Communicating with card (protect card)
• Framework for card and cardholder authentication
• Framework for card and terminal risk management
• It provides
• Security - ability to keep secrets active
  security upgradeable
• Capacity - much more data on the card
• Data processing - ability to receive, process and
  supply data

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What is VSDC?

• VSDC is the acronym for Visa Smart Debit and
  Credit
• Visas payment application was developed in
  accordance with Europay, MasterCard and Visa
  (EMV) Specifications and Visa Integrated Circuit
  Card Specifications (VIS)
• Provides enhanced security and functionality to
  support Visas current range of card products

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Magnetic Stripes are Vulnerable in Todays World

• Magnetic stripe cards are most vulnerable when
• The transaction cannot go online for
  authorisation
• The card issuer cannot verify that the person
  using the card is the real cardholder
• The terminal or the issuer cannot verify that the
  card is a legitimate card
• New technology is key to the environment e.g.
  unattended acceptance points
• VSDC adds new features to Visa products to combat
  fraud in these environments and to expand usage
  opportunities into new acceptance points

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What VSDC Provides

• VSDC provides the features and issuer
  functionality to answer these five key questions

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VSDC Cards Offer More Control Than Magnetic Stripe
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VSDC Components and Checks
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New Ways to Fight Fraud
Type of Fraud
Counter-measures
Magnetic Stripe
VSDC
Counterfeit
Skimming
Lost Stolen
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Impact on Fraud in a Mature Chip PIN Market

• The United Kingdom story .
• Issuance of chip cards commenced in mid to late
  -1990s
• Banks APACS worked together on chip PIN
• Non-competitive
• Aiming to reduce card fraud
• www.chipandpin.co.uk
• From 2004 PIN preferring chip cards issued
• 14th February 2006 removal of PIN Bypass
• The impact has been
• The success of chip PIN has meant that over
  the past three years losses on transactions on
  the UK high street have reduced by 67 from
  218.8m in 2004 to 73.0m last year. . APACS
  web-site, 2008 facts figures
• Card fraud has moved overseas to non-Chip PIN
  environments

Data Source http//www.apacs.org.uk/resources_p
ublications/card_fraud_facts_and_figures.html
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Agenda

• EMV
• Visa Smart Debit / Credit (VSDC)
• Features
• Impact on Fraud
• Multi-Application
• Contactless Payment

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Multi-Application Cards
Proximity payment (Contactless)
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Multi-Application Building Benefits with a
Relationship Card
Marys Everyday Card

• Visa Debit
• Visa Credit
• Drivers License
• Shop loyalty
• Movie e-ticket
• Library card
• Internet authentication

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Multi-Application Migration Path
Yesterday
Today
Tomorrow
Post Issuance
Dynamic multi-application card
VSDC Loyalty
Transport Id/Access
E-ticket
Static multi-application card
VSDC
Single application
Magnetic stripe card
Native Chip card
GlobalPatform Chip card
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Case Study Moscow Social CardProject Objectives

• Simplification and systemisation of the
  distribution of individual benefits, full control
  and accounting
• Introduction of common ID system for people on
  state benefit based on smart card technology
• Creation of common electronic register of state
  benefit recipients (2.5 million in Moscow)

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Case Study Moscow Social CardSocial Register
Card number
Re-issuance Number 964390 77 7106270001 6
09/06 0178
SOCIAL USAGE (90)
CHECK DIGIT(Luhn code)
CARD SEQ. NUMBER REGIONAL CODE
EXPIRY DATE(September 2006)
COUNTRY CODE (643 - RUSSIA)
SOCIAL ID NUMBER contains- REGIONAL CODE OF
FIRST ISSUANCE (2 digits)- SEX (for male plus 50
to the date of birth)- DATE OF BIRTH (6
digits)- SEQUENCE NUMBER (on this date, 4
digits) Example MOSCOW (77), MALE(712150), 21
JUNE 1927(710627), SEQ.NUMBER 1 (0001), CARD
RE-ISSUED (01) in ST-PETERSBURG (78)
ISO 7812

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Moscow Social Card More Than Just Cash!
Data in contactless memory
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Moscow Social Card Development
3. Dual interface (contact/contactless) card
2. International acceptance
1. Local pilot
Consumer benefits
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Multi-Application Business and Technical
Challenges

• Point of Access Challenges
• Card issuer controls application and customer
  information
• Integration into existing third-party programmes
  is difficult (back-end interfaces)
• Requires complex commercial and technical
  arrangements
• More complex data treatment
• Need to download applications

• Cardholder Challenges
• What is the killer application
• Lack of customisation to individual
  needs/preferences

• Issuer Challenges
• Creation and selling of packages time-consuming
  and complex for issuers
• Management of non-payment programmes is outside
  a bankscurrent core competencies
• Banks need to gain understanding of non-payment
  business
• Need Smart Card Management System (SCMS)

• Chip Challenges
• Size of applications on the chip may limit the
  number of applications which can fit onto a chip
• Need of a GP card
• More expensive

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Agenda

• EMV
• Visa Smart Debit / Credit (VSDC)
• Features
• Impact on Fraud
• Multi-Application
• Contactless Payment

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Visa payWave is
Standard EMV Terminal
Dual Interface Card
Contactless Reader

• Payment is made using Radio Frequency (RF) via an
  antenna embedded inside the Visa Contactless card
• Transmits the payment information quickly
  securely through the RF antenna to a reader
  connected to the merchants POS
• Ability to perform Visa transaction across a
  wireless interface to a physical POS device

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Visa payWave is

• Transaction where chip information is securely
  transmitted to the
  terminal wirelessly
• Uses the security developed for EMV chip
  technology
• One EMV apllication for both Contact
  Contactless
• Visa Contactless on a combination-card
• One chip, with two interfaces
• Contact
• Contactless
• No signature or PIN required for small ticket
  transactions (threshold varies by country)
• Visa Contactless Payment Specification (VCPS
  2.0.2) current specification to address global
  interoperability
• Includes quick VSDC (qVSDC) for chip markets,
  qVSDC takes a streamlined modified approach to
  meet the timing requirements
• qVSDC is based on EMV uses standard EMV
  cryptography for authentication
• Speed of transaction
• Transactions must be less than 500 milliseconds

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Where are the Opportunities ?

• Cash Acceptance Locations where speed of service
  is key
• Transit ticket purchases
• Quick Service Restaurants
• Retail chains such as Starbucks, Costa coffee
• Mobile Prepaid
• Petrol Stations
• Niche retailers

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Merchant Acceptance

• Importance of Transaction Speed
• Impact on merchants dependent on a faster
  throughput in queues to generate profit e.g.
  convenience stores, quick service restaurants
  (QSRs) Mobile prepaid
• Cost of Accepting Cash
• Affects business that incur a substantial amount
  of operating costs in terms of processing cash,
  especially small change, potentially lose
  income due to external/internal theft
• Consistency of Transaction Amounts
• Affects businesses that have a large percentage
  of transactions of a consistent sum e.g. cinemas
  that have a standard pricing for all tickets

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Transit Acceptance and Reload

• Using bankcards to buy transit fare media
• Transactions can be on demand or automatic
• Auto top up, post paid and mobile models offer
  maximum convenience for regular riders
• Retail prepaid load network
• Transit operators handle less cash
• Suitable for markets where both proprietary
  transit fare media and bankcard issuance are
  common
• Has no impact on card issuance and is business
  as usual for the issuers and transit operators
  as merchants

Many transit systems worldwide including San
Francisco, Singapore and Seoul
Examples
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Shared Card Visa and Transit

• Combining the transit application andfinancial
  payment on a single card
• Consumers have one fewer card to carry
• Transit operator has less fare media to
  distribute
• Branding on the fare gate is the transit brand
• Complimentary solution for markets where the
  contactless transit fare system is already
  efficient and effective

Hong Kong, Delhi, Singapore, Moscow, Taipei,
Tokyo, Seoul, Bangkok
Examples
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Thank you