Category: Payment systems

Ultra Wideband Payments

13th January 2020by Consult HyperionLeave a comment

It didn’t get much of a fanfare, but the new iPhones have an interesting new technology in them. It’s called Ultra Wideband, or UWB, and it’s in the iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max. It’s a technology used for some very interesting location-based applications. To give just one example, NFL players have UWB transmitters in each shoulder pad, part of broadcast technology used for instant replay animations. A football’s location is updated 2,000 times per second.

Anyway, it’s in my iPhone now and it will be showing up in Android phones later this year. If you look on the Apple web site, you’ll see the arrival of UWB confirmed with the interesting caveat that “availability varies by region”.

(The reason for this is that UWB is subject to national regulatory requirements that require it to be turned off in certain locations such as, to give one example, Vietnam.)

It’s not really a new technology as it’s been around for ages. The spectrum was opened up for commercial use in 2005 by the FCC for pulse-based transmission in the 3.1 to 10.6 GHz range and the IEEE (Institute of Electrical and Electronic Engineers) standard on UWB (802.15.4) came out more than a decade ago. The idea behind it was to send data by transmitting short, low-power radio pulses across a wide spectrum (the channels are ten times wider than the channels used for wifi). The data is encoded so that each bit is spread 32-128 of the nanosecond radio pulses so that you can send lots of data (say 10Mb/s) with little interference.

UWB was one of a family of wireless protocols, along with Bluetooth, ZigBee and WiFi, intended for short-range wireless communications with low power consumption. Back in the day it was assumed that, broadly speaking, Bluetooth was for a cordless keyboards and hands-free headset, ZigBee was for monitoring and control networks, while Wi-Fi was for computer-to-computer connections to substitute for wired networks and UWB was for high-bandwidth multimedia link. It never really caught on though. WiFi worked well enough and got faster, it got built in to laptops and phones and together with Bluetooth seemed to take care of most applications.

But then came the pivot.

It turned out that people found another use for UWB, because these nanosecond radio pulses have an interesting characteristic. They allow you to determine location with great accuracy. The short bursts of signals with their sharp rises and drops mean that the signal start and stop are inherently easier to measure than for wifi or Bluetooth transmissions. This means that the distance between two UWB devices can be measured precisely by measuring the time that it takes for a radio wave to pass between the two devices. It delivers much more precise distance measurement than signal-strength estimation and, what’s more, UWB signals maintain their integrity in the presence of noise and multi-path effects.

All of which means that with UWB it is possible to measure the time it takes the signal to travel from transmitter to receiver and calculate the distance in centimetres, giving much better distance information than determining distance based iBeacons and such like. Apps can therefore receive precise location data and location updates can be delivered every 100 ms if necessary. So UWB-equipped devices can determine the precise location of another UWB device and know whether it’s stationary, approaching or receding. For example, a UWB-enabled system can sense if you’re moving toward a locked door and it can know if you’re on the inside or outside of the doorway, to determine if the lock should remain closed or open when you reach a certain point.

So if you have a UWB phone and a UWB tag of some kind, then the phone can work out where the tag is. Now, I already use something like this, because I’m a big fan of Tile. If you haven’t used Tile, it’s an app on your phone that can locate Bluetooth tags. You buy these tags and then attach them to things (I’ve got one on my keys, one in my wallet and one in my notebook) so that you can find them. I can’t tell you how many times — maybe this is something to do with age — that I’ve misplaced my keys and saved hours of searching around the house by using the app.

Anyway, for the moment Apple only uses UWB to connect its own devices but there are standardisation efforts underway to interconnect devices from different manufacturers. An example use case (where Apple already has patents) is for keyless car unlocking.

(Apple is a charter member of the Car Connectivity Consortium, which created the Digital Key Release 1.0 specification in 2018.)

So why am I telling you about UWB now? Well, it’s because it has started to make inroads into the world of payments. In Japan, NTT Docomo has teamed up with Sony and NXP Semiconductors (their UWB chipset was announced last September) to trial technology that lets shoppers make NFC payments without having to take their phones out of their pockets. They are using UWB to follow user movement and positioning with location accuracy of a few centimetres

Pretty cool stuff! So if you are thinking about a fun payments skunkworks project, you might do worse than have a look at what UWB can do to transform your customers’ experiences at point-of-sale and then ask the Hyperlab team at Consult Hyperion to help you to put something together.

MaaS Solutions Using Mobile Wallets

12th December 20197th August 2020by John ElliottLeave a comment

I was delighted to have the opening speech at the Transport Card Forum (TCF) in London in which I talked about Mobile Wallets. At the previous meeting there was a presentation about mobile ticketing and a member of the audience asked why there was no mention of the use of mobile wallets. I tended to agree since most of our mobile ticketing projects have been about clever ways of using mobile wallets to get around the technical barriers associated with barcodes, HCE and the like.

There is a problem which Transport Scotland have termed the “Glasgow Conundrum”. Within one city or region, a passenger door-to-door journey might consist of several legs and each of these legs might be services by a different transport operator. Each operator might use a different ticketing technology and accept payments in different limited ways. From a customer point of view, it stinks; integration is what they need. But it is clear that there are two distinct questions:

1. How can the customer pay for travel rights?
2. How can the customer prove they own travel rights when travelling?

Payments

Ideally the payment mechanism would be decoupled from the type of travel rights and the transport operator. MaaS Providers should be free to accept payments from whatever means suit the customers. If you are interested in this aspect of things, download our white paper: MaaS Payments, a billion dollar opportunity. The download includes a discount code for Transport Ticketing Global 2020 where I will be chairing a panel again in January and judging the awards entrants.

Travel rights

The multiple legs that make up the end-to-end journey might be thought of as what the rail industry called ‘split ticketing’. Rather than having a single ticket, you can buy single tickets for each part of the journey and sometime (usually where Train Operator boundaries are crossed) this can work out cheaper. Mobile apps are very good at hiding this sort of complexity from the passenger and one can imagine that, using geolocation services, the app can decide which ticket should be presented when in order to sail through the gates and turnstiles. And all the split tickets could be stored in the mobile wallets.

Meanwhile, the sales of tickets are diminishing as the areas offering Pay As You Go (PAYG) continue to expand. Project ‘Oval’ round London is seeing the imminent expansion of PAYG contactless bank cards as far as Reading on the new Elizabeth Line from January 2020. For various reasons, Oyster will not be able to be used as far out. So, once again we are seeing contactless bank card technology reaching further than Oyster. There are government plans (election permitting) to add hundreds more rail stations to the TfL PAYG scheme.

London is not the only game in town, and we see other PAYG schemes around the UK. The continued expansion of PAYG represents improved customer experience but is not great news for retailers of travel rights unless they can find a way to sell PAYG and make a profit.

If the PAYG area accepts contactless bank cards (like London), then mobile wallets can be used to allow passengers to travel seamlessly in these areas. Citymapper launched a plastic prepaid Mastercard for this purpose for residents of London only in April 2019. It has recently become available as a virtual card using mobile wallets on both Android and Apple iOS devices. By contrast, the UK smart ticketing standards, ITSO, has partnered with Google and Google Pay wallet has been customised for ITSO so that now ITSO tickets can be loaded into the mobile wallets of Android phones only.

So, lots of choices. And the Glasgow Conundrum continues to some extent, though I can see MaaS Providers apps being able to hide this complexity if they get it right. I was very happy to recently have Ben Whitaker round at Chyp towers explaining Masabi’s take on automatic fare collection using mobile apps. We made a podcast about their Fare Payments as a Service and Ben’s views on where MaaS is going which I found very interesting.

At Consult Hyperion we have a lot of experience with smart ticketing, mobile ticketing and, in particular, mobile digital wallets. If you would like to learn more, give us a call.

SRC enters the secure digital commerce arena

28th October 201916th September 2020by Justin Gage1 Comment

Secure Remote Commerce (SRC) officially launched in the US last week, supported by a limited set of merchants, with more to launch by year-end and into early 2020. We’ve been tracking SRC for some time now as it moved through the specification development process within EMVCo. It has emerged at launch as a customer-facing brand called “Click-to-Pay,” unless you’re using an Amex card, where it’s also called “Online Checkout” in confirmation emails received after registering a card.

Continue reading “SRC enters the secure digital commerce arena”

4 Essential Trends in Money for your Business

21st October 2019by Consult Hyperion1 Comment

By Sanjib Kalita, Editor-in-Chief, Money20/20

This article was originally published on Money20/20.

We are in the midst of seismic societal changes of how people interact and transact. Across societies, geographies and segments, digital is the new norm. Change has accelerated, placing greater value upon flexibility and speed. Historically, money and finance have been among the more conservative and slower changing parts of society, but this has changed dramatically over the past decade by viewing money as an instigator of change rather than a lagging indicator.

Whether you are a marketer in shining armor conquering new territory, a financial wizard casting spells upon the balance sheet, or the queen or king guiding the whole enterprise, here are 4 trends about money that you should keep in mind for your business.

Platforms are the new kingdoms

Platforms are the base upon which other structures can be built. For example, App stores from Apple and Google provide the infrastructure for consumers to complete commercial transactions and manage finances through their mobile phones. While these companies develop their own digital wallets, they also enable similar services from banks, retailers and other companies. Building and maintaining the platform enables services that they would not have created on their own, like Uber or Lyft, which in turn, have created their own platforms.

Marketers trying to address customers’ needs can plug into platforms to broaden offerings or deepen engagement with target markets. Platform-based thinking implies that product and service design is ongoing and doesn’t stop with a product launch. Jack Dorsey didn’t stop when he built the Square credit card reader. The team went into lending with Square Capital. They got into consumer P2P payments with Square Cash. Their ecosystem has grown through partnerships with other companies as well as in-house development.

Digital Identities open the gates

How do your customers interact with you? Do they need to create a username and password, or can they use a 3rd party system like Google or Facebook? Are security services like two-factor authentication or biometrics used to protect credentials? Is your company protecting customer identities adequately? The importance of all of these questions is increasing and often the difference between being forced into early retirement by a massive data breach or surviving to continue to grow your business.

While identity management and digital security might not be top of mind for most marketers, they are table stakes for even the most basic future business. History is full of tales of rulers successfully fighting off armies laying sieges on castles and fortresses, only to fail when another army gets access to a key for the back door.

Context rules the experience

Credit card transactions moved from predominantly being in-store, to e-commerce sites accessed from desktop computers, and now to mobile phones. As the point-of-purchase expanded, so did the consumer use cases and thought processes. In tandem, mobile screens presents less information than desktop computer screens, which in turn presents less information than associates in a brick-and-mortar environment. Companies best able to understand context and deliver the right user experience within these constraints will build loyal customer relationships.

Apps or services created for a different use cases on the same platform, such as Facebook and Messenger apps, can help achieve this. Banks and have different apps for managing accounts or for completing transactions or payments. On a desktop, you can access these services through a single interface but on the mobile, forcing users to select their use case helps present a streamlined experience on the smaller, more time-constrained mobile screen. The use of additional data such as location, device, etc. can further streamline the experience. Marketers that don’t think about the context will lose the battle before it even begins.

Data is gold

While a marketer’s goal is to generate sales, data has become a value driver. In the financial world, data about payments, assets and liabilities has become critical in how products and services are delivered. PayPal, a fintech that began even before the word ‘fintech’, has recently been using payments data from their platform to help build a lending business for their customers. Similarly, an SME lender named Kabbage has grown to unicorn status by using data from other sources to make smarter lending and pricing decisions. In the payments industry, Stripe distilled a previously complex technology integration into a minimal data set, accessed via API, to easily build payments into new digital products and services.

Those that are able to harness the power of data will be able to predict what customers want and more effectively address their needs. In some cases, it might be using data from within your enterprise or from other platforms for targeting, pricing or servicing decisions. In other cases, it might be using data to reimagine what your product or service is.

Looking for more insights on key trends in money? Hear from 400+ industry leaders at Money20/20 USA. Money20/20 USA will be held on October 27-30, 2019 at The Venetian Las Vegas. To learn more and attend visit us.money2020.com.

This article was originally published on www.money2020.com.

Digital Wallet Ticketing

26th September 20197th August 2020by John Elliott1 Comment

I’ve just been in Bristol at the annual Transport Card Forum (TCF) two-day event. I was on the agenda as chair of Working Group 27 giving the final report on progress. The report will be going to DfT shortly and thereafter available to TCF members via the website. I’ve been attending TCF for many years and it is impossible not to notice how very slowly things change in transport ticketing.

One piece of our recent advice to a sub-national transport body, when hired to outline their smart ticketing strategy can be summarised as: do not seek government funding to implement a region-wide (expensive) smart ticketing solution, but rather look at what already exists and how these ticketing schemes might be brought together to meet the needs of the various travelling customer types in the region. In this context, I was pleased to hear mention of software development kit (SDK) offerings from Masabi and FAIRTIQ giving me hope that the transport ticketing industry is moving in the right direction. For example, Masabi using their SDK to insert their ticketing technology into the Uber app for trials in Denver, Colorado.

A recurring theme at the event was operators reporting how PAYG solutions are proving popular with customers and how they are eroding the other forms of ticketing such as season tickets. This is an increasing area of concern for clients we are working with, most notably in terms of cash flow and forecasting but also technically. Some of our current work is helping clients deal with the array of ticketing solutions they are operating and how to rationalise these in the light of the way that the automated fare collection (AFC) industry is moving and responding to customer needs. Consumer demands will continue to drive change in their purchase patterns as flexible and remote working opportunities increase.

It is not uncommon for a transport operator to support all of the following:

Paper tickets as the only medium interoperable at all acceptance points for all customer types.
Legacy smart card solutions based on 1990s technologies where the operators were focussed on owning the customer by issuing them with a smart card.
Barcodes as a cheaper alternative to smart cards that can also go paperless if delivered to mobile phones.
Mobile ticketing solutions based on bar code or flash pass, sometimes with low security levels and high fraud levels. Some using the ‘software only’ HCE innovations which Apple will not currently allow.
Open-loop (EMV bank card) PAYG solutions which have grown out of our work with TfL in 2008-14. These are intended to increase ridership and reduce costs by using the bank card in the customer’s pocket, but because they are one card per passenger, they do not cater for group tickets or for those not having (e.g. children) or not wishing to use bank cards. This could be addressed on buses by introducing a ‘retail model’, but this would require driver interaction to determine the price of the ticket before purchase and slow down bus boarding.

Operators are transport providers and their core business is providing transport services, not running ticketing solutions. The last thing they want is to be maintaining systems that have to be able to handle multiple different front ends, though many of them find themselves doing so. The classic example is TfL’s intention to switch off Oyster when open-loop was up and running, but they not yet managed to achieve this.

Our recent work with clients about how to use Digital Wallet Ticketing in a customer’s smart phone to unify their disparate ticketing solutions is proving popular. This has been both in sports stadiums and transport ticketing. Digital Wallet Ticketing was not much discussed at TCF19, which I guess is a sign of how slowly things move within the transit ticketing community. We believe DWT is the future.

We have a wealth of experience over several years of designing and building DWT solutions. Let us know if you’d like a chat about how this might work for you, be it payment, identity or ticketing.

GDPR: Consequences, Fines and Responses

10th July 201918th December 2020by Tim RichardsLeave a comment

The UK’s Information Commissioner’s Office (ICO) has finally done what it’s been threatening to for a while and levied enormous fines on British Airways’ parent International Consolidated Airlines (£183 million) and Marriott Hotels (£99 million). While subject to appeal, these are the first signs of how the ICO now has real teeth and is prepared to use them. The question is, what lessons can we learn from this?

Well, firstly, we can observe that card payments aren’t optimised for the internet. The BA breach looks like it was at entry point – i.e. it wasn’t that the data was breached while stored in a database but that someone managed to get hacked software to intercept payments in flight and capture the details. The point here, of course, is that the paradigm of giving your card details to the merchant so they can pass them to your issuer originated in the 20^th century when we didn’t have a choice. Now, given that we have this internet thing it makes more sense to contact our issuer directly and tell them to pay the merchant. Realistically, this may be the only way we can be sure merchants won’t lose our card details – don’t give them to them.

This points to push payments a la PSD2 APIs. But given that these won’t be pervasive for a while then the next best option is to tokenise cards to either limit their use to a single merchant or even a single transaction. Both of these are areas we’re seeing lots of interest in, and ought to be high on the agenda of heads of IT security and payments everywhere.

Secondly, we can note that static credentials are a sitting target. Seeing email addresses and passwords breached opens up companies to all sorts of horrible consequential damages under GDPR – let’s face it, most people reuse the same combinations across multiple sites so a breach on one site can lead to exposure on another. Any company relying on static credentials should basically assume they’re going to get some level of breach.

Fixing this requires two factor authentication and we have a ready-made, state-of-the-art, solution here in the EU. PSD2 SCA is about as strong an approach as you could ask for and we have banks and authentication providers drowning in relevant technology. There simply is no excuse for a company using static credentials if they get breached. We’ve been working closely with providers to look at how to take these solutions into the wider authentication market, because there’s been a certain inevitability about the way a lot of companies have dealt with their data breach protection.

Finally, note that the point that BA have made – that they haven’t seen any impact due to their breach – needs to be quantified: “yet”. Hackers tend to sit on breach data for 18 months before using it, waiting for the identity protection schemes that are often engaged post these events to expire. GDPR allows affected companies and individuals to sue – up until now the costs of a data breach have been borne by banks having to deal with fraud and issue new cards and consumers having to sort out identity protection. The ICO fines may yet be just the be tip of a very expensive iceberg as GDPR ensures that the costs more appropriately allocated to the offending parties.

SCA: the end of merchant liability, and other authentication factors

2nd July 201918th December 2020by Tim Richards2 Comments

The EBA’s recent Opinion on the elements of strong customer authentication under PSD2 was, apart from moving the goalposts on when SCA will be enforced, full of interesting information about what constitutes a valid SCA element. It closes some doors, opens others and ends any notion that merchants can take liability and not do SCA themselves.

Taking the final point first, there’s been a view that Article 74(2) of PSD2 permits merchants to carry on without implementing SCA as long as they take liability. We at Consult Hyperion have long argued that that is an optimistic and overly legalistic reading of the regulations and this has now been confirmed. The EBA states:

In addition, even if there were a liability shift to the payee or the payee’s PSP for failing to accept SCA, as articulated in Article74(2) of PSD2, this could not be considered an alleviation of PSPs’ obligation to apply SCA in accordance with and as specified in Article 97 of PSD2.

Basically, Article 97 takes precedence – PSPs (aka Issuers) must apply SCA so if the merchant chooses not to then rather than end up with a payment for which they’re liable they’ll end up with no payment at all. Which, you’d imagine, would rather miss the point of being a merchant.

Beyond this point the Opinion has lots of interest to say about inherence, possession and knowledge elements.

On inherence two points stand out. Firstly the Opinion unambiguously states that behavioural biometrics can be a valid factor: this opens up a world of possible low friction SCA, and we expect to see lots of innovation in this area. Secondly it states that 3DS-2 does not support inherence as none of the data points being gathered relate to biological or behavioural biometrics but – and we view this as important – 3DS-2 is a valid means of supporting SCA.

This is critical because the dynamic linking process behind 3DS-2 is not straightforward and there have been differences of opinion over whether this is compliant. Given that 3DS-2 appears to be the only game in town for CNP transactions having a statement that it’s OK is mighty important.

On possession, the EBA clarifies that OTP SMS is valid and also that mobile app based approaches can be – but only if the app is linked to the device. We’ve been arguing that this is obviously the case for a while, so it’s good to see this confirmed: although there are going to be a few app developers out there that need to revise their approaches pdq (we can help, of course!).

Also on possession the EBA has stated something that really should have been obvious to anyone taking more than a moderate interest in the topic – printed card details such as PAN and CVV or user ids and email addresses are not valid possession or knowledge elements. As a number of prominent industry players have been taking the opposite approach this could lead to some interesting developments in the coming weeks, particularly as the Opinion states that if the CVV is not printed on the card and is instead sent on a separate channel, then it is a valid knowledge element.

Overall, the analysis and discussion in the Opinion on valid SCA elements is welcome, if a trifle tardy. To be fair to the EBA, we don’t see anything in their analysis that a proper reading of the RTS wouldn’t have produced. However, it’s been clear for some time that many industry players have been making a highly liberal interpretation of the requirements usually based on a legal opinion. But PSD2 and the RTS are about principles, not rules: if you need advice on this you need to talk to the people who understand this stuff. Which, by the way, is us, not law firms.

The EBA blinks first …

28th June 2019by Consult HyperionLeave a comment

EDIT: since posting this blog the UK’s FCA has confirmed our expectation that it won’t be enforcing SCA on the 14^th September as long as the participants are aiming to comply with a soon to be announced migration plan. In the meantime it’s “working with the industry to develop a plan to migrate the industry to implement SCA for card payments in e-commerce as soon as possible”. See: https://www.fca.org.uk/news/statements/fca-response-european-banking-authority%E2%80%99s-opinion-strong-customer-authentication

The doom-laden headlines appearing in the press have, it seems, worked and the EBA has decided to replace the 14^th September deadline for the introduction of SCA with … another deadline. Only they won’t tell us what it is, presumably we have to figure it out for ourselves.

So, let’s see what the EBA has done now …

Firstly, they haven’t actually changed the date as they can’t, it’s written into EU law. But given dire warnings of a collapse in online payments they’ve come up with a fudge:

The EBA therefore accepts that, on an exceptional basis and in order to avoid unintended negative consequences for some payment service users after 14 September 2019, CAs may decide to work with PSPs and relevant stakeholders, including consumers and merchants, to provide limited additional time to allow issuers to migrate to authentication approaches that are compliant with SCA, such as those described in this Opinion, and acquirers to migrate their merchants to solutions that support SCA.

https://eba.europa.eu/documents/

Let’s summarise that. National regulators – competent authorities (CAs) – may work with PSPs (Issuing and Acquiring banks) and unregulated actors (merchants, consumers) to agree to delay the introduction of SCA. Which presumably means unprepared merchants and confused consumers are breathing a sigh of relief. Unfortunately, as this is now in the hands of local regulators there’s no guarantee at all that this will be applied evenly, opening up the possibility that some countries will enforce and others (notably the UK and France) will not.

On top of that, there’s no guarantee that Issuers won’t apply SCA anyway, even if their local regulator permits them to not do so. So merchants who are unprepared may still find themselves suffering random declines. And, furthermore, if Acquirers haven’t implemented the necessary changes then even if the merchants are compliant they may still have transactions irrevocably declined.

Note also the “limited additional time” clause. Frankly, introducing SCA prior to the critical holiday shopping period was foolish anyway (but was an unintended consequence of the 18 month implementation period following the adoption of the RTS), so we can assume that the date will be pushed out at least into early or mid 2020. The EBA adds (but not in the actual Opinion):

In order to fulfil the objectives of PSD2 and the EBA of achieving consistency across the EU, the EBA will later this year communicate deadlines by which the aforementioned actors will have to have completed their migration plans.

And that’s the catch:

This supervisory flexibility is available under the condition that PSPs have set up a migration plan, have agreed the plan with their CA, and execute the plan in an expedited manner. CAs should monitor the execution of these plans to ensure swift compliance with the PSD2 and the EBA’s technical standards and to achieve consistency of authentication approaches across the EU.

Basically, Issuers and Acquirers need to publish what they’re going to do including how they’re going to communicate the requirements to consumers and merchants respectively. Quite how this is all going to be co-ordinated is unclear – no sensible merchant is going to disadvantage themselves by unilaterally turning on SCA when its competitors aren’t. Issuers may take the same approach, as they probably don’t want their cardholders switching to other banks: but there’s no requirement on them to do so.

The rest of the opinion focuses on the validity of various authentication factors. That’s interesting too, but we’ll look at the implications of it another day.

The one thing this does allow is for 3DS-2.2 to be made ready. That’s an advantage to smart merchants who can at least develop a proper, low friction SCA strategy. In the meantime, we’re looking forward to getting involved in lots of migration planning.

Crazy Cards

16th April 2019by Consult HyperionLeave a comment

Crazy Cards

The reasons behind the presence of mag stripe on cards alongside chip (and PIN) has long been a debate at Consult Hyperion. Especially for the US where things were different for years – of course now the US has introduced chip and PIN as well.

But putting numbers and signatures on cards helps criminals. There’s no need for it.

A couple of years later, in “Tired: Banks that store money. Wired: Banks that store identity” we asked why banks didn’t put a token in Apple Pay that didn’t disclose the name or personal information of the holder, a “stealth card” that could be used to buy adult services online using the new Safari in-browser Apple Pay experience. This would be a simple win-win: good for the merchants as it would remove CNP fraud and good for the customers as it would prevent the next Ashley-Madison catastrophe. Keep my real identity safe in the vault, give the customer a blank card to go shopping with.

Brazil Nuts

Some years ago, we were testing Static Data Authentication (SDA) “chip and PIN” cards in the UK, we used to make our own EMV cards. To do this, we took valid card data and loaded it onto our own Java cards. These are what we in the business call “white plastic”, because they are a white plastic card with a chip on it but otherwise completely blank. Since our white plastic do-it-yourself EMV cards could not generate the correct cryptogram (because you can’t get the necessary key out of the chip on the real card, which is why you can’t make clones of EMV cards), we just set the cryptogram value to be “SDA ANTICS” or whatever (in hex). Now, if the card issuer is checking the cryptograms properly, they will spot the invalid cryptogram and reject the transaction. But if they are not checking the cryptograms, then the transaction will go through.

You might call these cards pseudo-clones. They acted like clones in that they worked correctly in the terminals, but they were not real clones. They didn’t have the right keys inside them. Naturally, if you made one of these pseudo-clones, you didn’t want to be bothered with PIN management so you made it into a “yes card” – instead of programming the chip to check that the correct PIN is entered, you programmed it to respond “yes” to whatever PIN is entered. We used these pseudo-clone cards in a number of shops in Guildford as part of our testing processes to make sure that issuers were checking the cryptograms properly. Not once did any of the Guildford shopkeepers bat an eyelid about us putting these strange blank white cards into their terminals. Of course it’s worth noting things have progressed and fortunately this wouldn’t work now as the schemes have moved on from SDA.

I heard a different story from a Brazilian contact. He discovered that a Brazilian bank was issuing SDA cards and he wanted to find out whether the bank was actually checking cryptograms properly (they weren’t). In order to determine this, he made a similar white plastic pseudo-clone card and went into a shop to try it out.

When he put the completely white card into the terminal, the Brazilian shopkeeper stopped him and asked him what he was doing and what this completely blank white card was, clearly suspecting some misbehaviour.

The guy, thinking quickly, told him that it was one of the new Apple credit cards!

“Cool” said the shopkeeper, “How can I get one?”.

Titanium Dreams

That Brazil story was written back in 2014! There was no white Apple credit card at that time but it was interesting that the shopkeeper expected an Apple credit card to be all white and with no personal data on display, just as we had suggested in our ancient ruminations on card security. Imagine the total lack of surprise when the internet tubes delivered the news of the new actual Apple credit card launched in California a couple of weeks ago. Apple CEO Tim Cook said that the new Apple Card would be the biggest card innovation “in 50 years” [FT]. This seems a little rough on the magnetic stripe, online authorisation, chip and PIN, debit cards, contactless interfaces and so on, but it is certainly an interesting development for people like us at Consult Hyperion.

The story gathered the usual media interest. A number of reports on the web reporting on “Apple going into banking” which, obviously, they are not. Far from it. The Apple Card issuer is Goldman Sachs (it’s their first credit card product) and the card product is wholly unremarkable. The card looks pretty cool though, no doubt about that. I still don’t know why they put the cardholder name on the front (instead of their Apple ID).

Apple Card is launching into an interesting environment. The US POS is a confusing place but Apple know their stuff and I am sure that they think they can use the 2% cash back on ApplePay purchases vs. the 1% on chip/stripe to push people toward the habit of using their phones at POS instead of cards. Judging by the sign I saw in an Austin gas station, they may be right.

The Apple Card adds security, there’s no doubt about that. The card-not-present PAN and CVV displayed by the app (which can be refreshed) are not the same as the PAN and CVV on the stripe, so you can’t make counterfeit stripe cards with data from the app and Apple uses the Mastercard token Account Update service, so if you give (say) Spotify the CNP PAN/CVV and then refresh it, you don’t need to tell Spotify that you’ve changed anything because Mastercard will sort it out with Spotify. That’s security for the infrastructure and convenience for the customer.

Now You See It

While I was jotting down some notes about Apple Card, I was thinking about David Kwong, the illusionist. He gave an entertaining talk at Know 2019 in Las Vegas and I was privileged to MC his session. I was sitting feet away from him and I couldn’t figure out how he did it. That’s because he is a master of misdirection!

I can’t help feeling that there’s a bit of misdirection going on with Apple Card. The press are reporting about the card product, but it’s really not that earth shattering. It seems to me that what is really important in the announcement isn’t extending Goldman Sachs’ consumer credit business or that bribe to persuade apparently reluctant consumers to use Apple Pay at contactless terminals instead of swiping their card, but the attempt to get people to use Apple Cash. Cognisant of how Starbucks makes out by persuading citizens to exchange their US dollars that are good anywhere into Starbucks Dollars that are not, and of Facebook’s likely launch of some kind of Facebook Money, Apple are hoping to kick-start an Apple Cash ecosystem.

You may have noticed that as of now, you can no longer fund person-to-person Apple payments (in Messages) using a credit card. You can still fund your Apple Cash via a debit card. You can pay out from your Apple Cash to a Visa debit card for a 1% fee or via ACH to a bank account for free. They want to reduce the costs of getting volume into Apple Cash and make it possible for you to get it out with jumping through hoops. Given that you can do this, you’ll be more relaxed about holding an Apple Cash balance and that means that next time you go to buy a game or a song or whatever, Apple can knock it off of your Apple Cash balance rather than feeding transactions through the card rails.

And why not? In this ecosystem Apple would carry the float, which might well run into millions of dollars (Starbucks’ float is over a billion dollars), and if it could persuade consumers to fund app, music and movie purchases from Apple Cash instead of cards it would not only save money, but anchor an ecosystem that could become valuable to third-party providers as well. With Facebook’s electronic money play on the horizon, I think Apple are making a play not for a new kind of card to compete with my Amex Platinum and my John Lewis MasterCard but for a new kind of money to compete with BezosBucks, ZuckDollas an Google Groats.

The Yin Yang Twins: SRC and W3C’s Payment Request API

7th March 20198th January 2021by Assad UmarLeave a comment

In the world of online payments (card not present), two issues that seem to be unavoidable are:

• Continuous rise of card-not-present fraud. Fraud rates for card not present are running at between four and ten times greater than card present depending on merchant sector

• High cart or basket abandonment rates. Average e-commerce abandonment rate is of the order of 65%, with 24% of customers at merchants using 3DS 1.0 abandoning the transaction after starting the checkout process.

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