Category: Payment Cards

Account-based ticketing workshops

18th December 2016by Consult Hyperion2 Comments

We’ve been having a lot of fun in recent months leading workshops for transport operators about account-based ticketing. Sharing our recent experience with clients such as the UK’s Transport for London (TfL) and Transport for the North (TfN), Hungary’s BKK, New Zealand’s NZTTL, Belgium’s De Lijn and Stockholm’s Storstockholms Lokaltrafik (SL) and Singapore’s LTA.

The workshops are designed to help transport operators who are new to account-based ticketing understand the issues and options, including how Open-Loop bank cards can be blended with existing smart ticketing. A typical agenda covers the following subjects:

Trends

Customer propositions should drive everything
Smart ticketing trends
Technology roadmap
Benefits of ABT and Open-Loop

Architecture

Basic architecture overview
Generic architecture
Open loop vs closed loop (the back office)
Providing for the unbanked

Open-Loop solutions

Open loop implementatons in other countries
The 4-party model for payments
Transit Transaction Models (’Models 1-3’)
Transit Charging Framework (generic, global)

Compliance

EMV
PCI DSS
Working with a QSA

Our latest workshop was sponsored by Mastercard and hosted by Swedbank in Riga, Latvia, and had an audience of 40 including:

Transport operators
Government bodies
Industry suppliers
Media

We are looking forward to leading more similar workshops in 2017 across Europe.

Riga workshop sponsored by Mastercard and hosted by Swedbank.

Discussing a 'strawman' solution for Riga's needs. — Discussing a ‘strawman’ solution for Riga’s needs.

ODA is a good thing, and not only for transit operators (are you listening USA?)

22nd August 2016by Consult Hyperion4 Comments

Following the success of Transport for London’s (TfL) Contactless Payments program, a project Consult Hyperion have contributed to since 2008, transportation agencies around the world are following TfL’s lead looking to bring the same convenience to their own customers. Operators are migrating from a world where customers have to exchange real money into transit money before they can ride on a bus or a subway, to a world where you simply tap your bank issued contactless credit or debit card on the transit reader.

The Problem

As brilliant as this new world of transit payment is, it does expose the operator to some level of risk as well as deliver a variety of benefits. I’ll address other risks and benefits in later posts, but for now I want to focus on the risk of accepting a counterfeit bank card in exchange for free travel.

Of course, the benefit of accepting payment cards for transit is that you can reduce the cost of card issuance through using the card customers already have in their pocket. Customers benefit from being able to pay for transit the same way they make other retail purchases every day. With this approach you get the additional benefit of payment card security and you don’t have to rely on proprietary cryptographic techniques that could one day expose your system to fraud. Easy, right?

Well, it’s not quite that simple.

While bank chip cards come with a toolkit of security options for card issuers to use, the majority of issuers of EMV cards in the US today have only implemented one of those options required for the domestic online-only market.

To understand the issue, remember that all EMV cards generate a unique code called a cryptogram which only the card issuer can validate. So for each transaction, the card details and cryptogram are captured and sent for direct verification with the card issuer, who returns a message to accept or decline the transaction to the merchant.

However, this ‘online-only’ option is not suitable for transit operators.

One issue for transit operators is rate of customer throughput. In cities looking to implement open loop payments for transit (the acceptance of EMV cards), there is a need to handle large numbers of passengers passing through the subway gates or boarding buses. There is not enough time, in this fast moving environment, to wait for each transaction to be authorised online by the card issuer, and there are genuine health and safety risks to slowing down people moving through the system. Hence the strict time limits on transactions:

[Shashi Verma, TfL] said “contactless cards could now deliver transaction times in under the crucial 500ms at which longer queues begin to form”.

http://www.telegraph.co.uk/technology/news/10990294/Tube-to-adopt-contactless-payment-cards.html

“Agencies who have carried out NFC pilots argue that a device must have a transaction time of less than 500ms to be viable, and prevent passenger delays at turnstiles.”

http://www.masstransitmag.com/blog/10615616/nfc-the-mass-transit-payment-revolution

Looking at the how the transit transaction times break down in detail, we find that:

There is some time spent by the reader to detect a card and determine what type of card it is. This should take in the order of 10ms but may increase if different card technologies are accepted at the transit reader
Then there is a longer period of time where the card and the reader exchange some data that typically takes anywhere from 300 to 400ms on contactless bank cards currently-issued.
Finally, the typical times for a card issuer authorisation that we have observed are anything from 500 to 2000ms.

As you can see, adding these times together we are well over the 500ms target the transit industry is seeking.

Now, transit merchants could take the risk on one transaction and check with the card issuer that everything is ok with the card while the customer is making their first journey. If the issuer declines the transactions, the transit operator could put the card on a hotlist to prevent further travel. Seems reasonable? The trouble with this is there is an opportunity for the intrepid fraudster to develop a simple mobile application that looks to a contactless reader like a normal payment card, but in fact, for each transaction, generates a new identifier that will sidestep the transit hotlist.

How Offline Data Authentication helps

There is another option available to card issuers in the EMV toolkit that helps the transit operator meet their 500ms target and also mitigates the risk from counterfeit cards – Offline Data Authentication (ODA). ODA is a method that allows the reader to determine the authenticity of the card and the card issuer using the cryptography provided in contactless bank card chips and readers. Using ODA has the following effect on the transaction time, now that we don’t need to go check with the issuer to authenticate the card:

As before, the time to detect the card and allow the card and the reader to exchange data remains the same, about 310 – 410ms
Now, the time to carry out ODA now adds around 50ms, meaning a new total transaction time of 360 – 460ms

This meets the 500ms target.

It’s time for ODA to be mandated for all Contactless

Contactless bank chip cards personalised with ODA, as mandated in most payment scheme regions, allows transit operators and other merchants alike to mitigate transaction risk by authenticating the card offline. If transit operators can prove the card is genuine and not on their own hotlist, they can open the gates or let the customer on the bus. The next step for the operator will be to get card issuer authorization while the customer is making their first journey. Now they have all the information they need to decide if the customer can make the second journey or not.

While transit operators in established contactless bank chip card markets (outside the US) can introduce open loop payments safe in the knowledge that contactless cards are all going to be supporting ODA, in the US, the picture is less than clear. Migration to bank chip cards is still in its first year, there are very few contactless card products issued and mobile payments such as Apple Pay and Android Pay represent the largest use of ‘contactless’. While transport operators are looking to accept contactless bank cards, they cannot risk doing so until the US domestic cards are ODA capable. If the card brands and US banks want a slice of the US transit market ODA must be at the top of the to-do list.

(By the way, ODA is not just beneficial for transit operators; there are other merchants where this technology can also be helpful. For example, following a natural disaster where communications go down but merchants still need to keep trading to ensure essential supplies get to the right people, or merchants who wish to offer quicker processing at peak periods).

The solution at TfL was simple and effective. If a contactless bank card is presented that does not support ODA, it is rejected and the customer is not allowed to travel. When ApplePay was launched in the US, not all implementations supported ODA and these were also rejected at TfL gates. By the time ApplePay launched in the UK, this problem had been fixed. From a customer support perspective, the US needs to be in a position where all cards have ODA and not just some. Transit operators don’t want to block brands (but could do to avoid confusion). It will be impossible to put a message across to customers that some can use the system and others can’t due to something obscure and technical like ODA!

Yes I heard the news, it’s the same old blues again

9th August 2016by Consult HyperionLeave a comment

I love J.J. Cale. His 2001 live album is one of the most-played on my iPhone. Sadly, it’s doesn’t have a live version of one of my all-time favourite J.J. Cale tracks on it: I got the same old blues. In case you don’t remember…

Have you heard that rumour / that’s a going round

You got it made / way across town

It’s the same old story / tell me where does it end

Yes I heard the news / it’s the same ol’ blues again

I think of this every time I read a story about how EMV chips are trivial to clone and how the banking system is about to collapse because of multi-billion pound frauds. So when someone sent me a link to this… same ol’ blues again:

As it turns out, the cards are just as easy to clone as their magnetic stripe predecessors.

From Forget card skimmers, chip-card shimmers will be your next nightmare • The Register

No, they’re not. If they were, then the “black hats” would be living in the lap of luxury on the proceeds of their undetectable crime and the world’s biggest issuing banks (who bear the cost of fraudulent EMV transactions) would be bankrupt. They’re not (or at least, not because of card fraud, which was a piffling half-a-billion quid or so in the UK last year) so perhaps the claim might be ever-so-slightly exaggerated. What this story is actually about is tampering with terminals in order to steal PINs, which is a flaw with EMV deployment because enciphered PIN is not implemented as the standard cardholder verification method (CVM), but it’s not a flaw with cards and it doesn’t help you to clone the chips. In EMVCo’s official response to this story they say that

The attack described in the Breaking the Payment Points of Interaction (POI) presentation captures static card transaction data in order to attempt fraudulent magstripe or e- commerce transactions, where EMV is not used. This type of attack relies on magstripe information and not the EMV chip. It is EMVCo’s view that when the full payment process is taken into account, suitable protection exists to mitigate against this type of attack, such as ensuring that information read from a chip card is not sufficient to create a valid magstripe card.

I bolded the EMV point, by the way. What EMVCo mean by that last sentence is that issuers should ensure that the ICVV in the chip is not the same as the CVV on the stripe. I wrote about this nearly ten years ago when ICVV was introduced in the UK so if there are any issuers out there who are still setting the chip ICVV to be the same as the stripe CVV then, well, they deserve everything they get.

In a similar vein, I was sent a few links to a story about another new “new security flaw” in EMV. I won’t give you the link here because there’s no point following it. I can give you the skinny in half a line: if you rewrite the service code on the stripe to indicate no chip present, then the CVV, which is calculated using the service code, will no longer be valid. If any issuer authorises that transaction then they are either somewhat cavalier in their risk profiles and find it sexually thrilling to put shareholders’ money on the line or they had the wrong consultants advising them on their card issuing and authorisation strategies. In other words, they deserve everything they get. But it’s not a “security flaw” in EMV it is a “moron flaw” in the authorisation system.

Incidentally, on a related topic, my good friend Stephen Murdoch wrote an interesting piece about what are called “relay attacks” (or “ghost and leech attacks) on contactless cards. I remember that a fair few years ago one of our clients had us build a ghost and leech system just to see if it would work. It did. But then everyone knew this. Here I am talking about it ten years ago:

David reinforced the feasibility of relay attacks against contactless systems and in the subsequent discussion, it seemed to me that me people felt that serious fraudsters would begin investing in this soon, so the industry needs to take it seriously.

From Taking a punt | Consult Hyperion

As it happens, fraudsters never did invest in it (because the contactless no-CVM limit of thirty quid makes it a very time-consuming and expensive way to steal not very much). Our clients did their risk analysis and decided that there was no need to fix it right away but maybe think about it longer term. One potential defence against this attack is based on timing and such a defence has now been defined by the EMV chaps. This is what is called (by MasterCard, since no-one else implements it yet) the “MasterCard Relay Resistance Protocol”. So, as Stephen says, as part of the transaction, the terminal sends a command to the card and measures how long it takes to respond. The response contains timing limits indicating how long it should take.

When the EMV cryptogram is generated by using Combined Dynamic Data Authentication-Application Cryptogram Generation (CDA), the response also contains the same timing limits, but these are digitally signed. If they don’t match the limits received earlier, or if the timed command exceeds the limits, then the transaction has failed and the terminal needs to decline the transaction. To be honest, a fair few observers have pointed out that because these are hard-coded limits, any variance in genuine devices may create more false negatives (genuine transactions incorrectly declined) that positives (actual attacks). Plus it needs all terminals to be modified and all cards to be replaced or renewed, and as I noted earlier it’s MasterCard only, so it may not be widespread any time soon, and it’s at least worth wondering whether it will be universal before #cardmaggedon (the day when non-card electronic transactions exceed card transactions at retail point-of-sale).

By the way, #cardmaggedon will be one of the topics covered in the discussions at this year’s Tomorrow’s Transactions Toronto Unconference to be held in the MaRS Discovery District on 29th September 2016. The post-card payments future will be the kick-off topic to get everyone thinking about where the world of retail payments might be going next. I look forward to seeing you all there.

1966 and all that

29th June 2016by Consult Hyperion

Ah, 1966. Back to a time when Bobby Moore lifted the World Cup and the Mini Cooper and Mini Skirt were the vanguard of a new pop culture. The French were in the Common Market and we weren’t. Remember that week when “Paperback Writer” by The Beatles was no.1 in the charts? When the French left NATO (#Frexit) and when US planes started bombing Hanoi? No? Well, you should do, because it was the week that Barclaycard launched in the UK.

This is the first ever advertisement for a payment card on British television. It was for British Linen Bank’s Barclaycard.

On 29th June 1966, an old boot factory in Northampton became the epicentre of the payment revolution when Barclays Bank launched the Barclaycard.

The card scheme was approved by the board without any market research or pilot, or adequate in-house computer system, and in the face of not inconsiderable internal and external suspicion, even hostility. It was recognised that profitability would be long-term, since the set-up costs were so high and credit controls strict.

From Barclaycard: 50 years of plastic money – Archives Hub Blog

Yes, the Great British credit card is 50 today! Well, I say British, but it was actually a licensed version of the BankAmericard product and it wasn’t actually a credit card because until the Bank of England permitted them to offer credit in November 1967, Barclaycard balances had to be paid in full when the bill arrived, but you get the general picture. It wasn’t an overnight success, of course. It took more than five years for Barclaycard to reach 1.5m cardholders and 75,000 merchants and finally turn in a profit, but when it did the profit was sufficient to stimulate the other big banks (National Westminster, Midland and Lloyds) to get their act together and launch the rival Access card in 1972.

Access didn’t hit on their “flexible friend” meme until the 1980s.

Half a century. It’s not such a long time in the great scheme of things, and I can’t help but wonder whether the payment card will still be around in another half a century. I’m sure many of us remember our first credit card. Mine was indeed a Barclaycard and I got it when I first opened a bank account when I went to university. My life of credit-induced bondage as a serf on the plantations of the financial services industry began at that point and I have never looked back. But the provision of that credit is banking business and payments really are not, so I can’t see that this will be the way that future generations will enslave themselves. Credit will be around in 50 years I am certain (if Bitcoin is the only currency left by then, I’ll still need to borrow them to pay for my holiday), but credit cards will not. And it’s not just nerdy techno-utopians obsessed with finding new problems for our solutions who think this.

Anthony Jenkins, when head of Barclaycard, rather famously (to me) said that mobile phones would get rid of cards before they got rid of cash.

From The dawn of the cardholder-present transaction (Salford edition) | Consult Hyperion

In fact, what Anthony said was that “In 50 or maybe even 10 years’ time, we will still be using cash but I don’t think we’ll have plastic. It is comparable to the move from CDs to MP3 music files… If I had said 10 years ago that you couldn’t pay with a cheque at the supermarket, you wouldn’t have believed me. That is now the reality, and we see plastic cards going the same way.”

The Barclaycard that I have in my wallet right now (well, actually it’s loaded into my iPhone, the actual card is at home in a drawer somewhere) bundles together all sorts of disparate things: the payment itself, the payment guarantee to the merchant, the identity and authentication of the customer, consumer protection, loyalty schemes and so on. But it is not clear to me at all why these should remain bundled in this way. New technology means that we can have specialist providers of each of these services and have the services integrated seamlessly in our phones, in the cloud and on the blockchain too I shouldn’t wonder. Will we see a 100th birthday for the plastic card and a telegram from Queen Kate? I don’t think so, to be honest.