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PreviousPrevious lecture lecture

Diffie-Hellman key agreementAuthenticationCertificatesCertificate Authorities

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Today’s Today’s AgendaAgenda – – SmartcardsSmartcards

The problem we want to solveGeneral information on smart-cardsNew possibilitiesTransaction overviewEMV

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Problems with Magnetic Problems with Magnetic StripeStripe

Easy to copy– Possible to make an exact copy of the magnetic-

stripe image

Off-line risk management very rudimentary– No possibility to put risk levels on individual cards

or groups of cards

Transactions can be modified by dishonest merchants

Smart-cards address these problems

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What Is a Smart-CardWhat Is a Smart-Card

A smart-card is a small computerOften placed on a credit-card sized

plastic cardCan have contacts or be contact-lessHas a well-defined interface

– Can have secret information that is protected from direct access

First appeared in the 1970s

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Advantages with Smart-Advantages with Smart-CardsCards

Can have secret data– Data used for internal computations and never

revealed in clear– Example: PIN and keys can be stored on card

Can process data and save information– Count transactions– Check PIN and count unsuccessful tries– Different behavior depending on geographic location– Cryptographic functions

Uses the secret keys

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New FunctionalityNew Functionality

Off-line risk management– Can be configured at an individual level

Off-line card-holder verification– PIN stored on card

Resistant to skimming attacksTransactions cryptographically

authenticated– Reduces fraud rate

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Off-line PINOff-line PIN

Increases speed for low-amount transactions

PIN is checked by card– PIN is never revealed outside card. After a

predefined number of tries, the PIN functionality is blocked.

Can be sent to card in clear or encrypted– Depends on card and terminal functionality.

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Card Authentication to Card Authentication to TerminalTerminal

Authentication to prevent use of fake cards Certifies that the card was not modified after

issuance Prevents alteration of risk-related parameters Two types – static and dynamic

– Static – no special requirements on card. Does not stop skimming attacks. (Skimmed cards will be detected on-line.)

– Dynamic – requires RSA functionality on card. Prevents skimming attacks.

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Online AuthorizationOnline Authorization

If card or terminal wants to go online, the transaction is verified online

On-line transactions are digitally authenticated– Prevents use of fake cards– Prevents the merchant from re-using the card

number The response from the issuer is digitally

authenticated– Important to avoid, e.g., wrongful change of PIN

and update of risk parameters.

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Smart-Smart-ccard Tard Transaction ransaction FlowFlowCard Terminal Acquirer Issuer

Card – terminalinteraction

On-line authorization(conditional)

Card – terminal interaction(if after online authorization)

Transaction data transfer(possibly including declined transactions’ info)

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Smart-Smart-ccard Tard Transaction ransaction FlowFlowCard Terminal Acquirer Issuer

Card – terminalinteraction

On-line authorization(conditional)

Card – terminal interaction(if after online authorization)

Transaction data transfer(possibly including declined transactions’ info)

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Interaction between Card Interaction between Card and Terminaland Terminal

Cards authenticates itself to the terminalOffline risk control used to decide

whether to go online or not– If card wants to go online, transaction is

checked online– If terminal wants to go online, transaction is

checked online

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Smart-Smart-ccard Tard Transaction ransaction FlowFlowCard Terminal Acquirer Issuer

Card – terminalinteraction

On-line authorization(conditional)

Card – terminal interaction(if after online authorization)

Transaction data transfer(possibly including declined transactions’ info)

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Interaction between card Interaction between card and issuerand issuer

If the decision is to go online, a message is sent to the issuer– Message includes information on the interaction

between card and terminal Issuer checks that the message is

cryptographically correct The issuer either approves or declines the

authorization The response from the issuer can be

cryptographically authenticated

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Smart-Smart-ccard Tard Transaction ransaction FlowFlowCard Terminal Acquirer Issuer

Card – terminalinteraction

On-line authorization(conditional)

Card – terminal interaction(if after online authorization)

Transaction data transfer(possibly including declined transactions’ info)

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Interaction between Card Interaction between Card and Terminal, Part 2and Terminal, Part 2

Based on the result from the issuer, transaction is either approved or declined.

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Smart-Smart-ccard Tard Transaction ransaction FlowFlowCard Terminal Acquirer Issuer

Card – terminalinteraction

On-line authorization(conditional)

Card – terminal interaction(if after online authorization)

Transaction data transfer(possibly including declined transactions’ info)

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Interaction between card Interaction between card and issuer, part 2and issuer, part 2

If the transaction is approved, a message containing transaction data is sent to the issuer.

In case of a dispute, this message can be used by the issuer to prove that the transaction is valid.– Same function as a signature for magnatic

cards.

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Post-issuance AdaptationsPost-issuance Adaptations

Used to address change in risk– Student finds permanent work – risk decreases– Client misses a payment for a loan – indicates

increased risk

Used to change settings– PIN change at ATM

React to new circumstances– Block application if card number in stop-list

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ScriptsScripts

Sent from host to card at online transaction Contains information to be processed by card Standard commands include

– Change value of a risk parameter– Change off-line PIN– Block application– Unblock application

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EMV – Europay, EMV – Europay, MasterCard, VisaMasterCard, Visa

Necessary to have standards for smart-cards– Physical size– Electrical connection– API for payment applications

Any smart-card must be usable anywhere Europay, MasterCard and Visa have created

specifications named EMV for this purpose

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EMV and CryptographyEMV and Cryptography

EMV specifies how the principles for authentication– Card – terminal, static or dynamic– Card – issuer, using MACs

Suggests algorithms for computation of MAC– Providers may use other algorithms

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SummarySummary

Smart-cards solve the security problems associated with magnetic-stripe cards.

Enables more powerful offline risk control. Whether to process transaction offline or online

is a joint decision between card and terminal. The EMV specifications ensure worldwide

acceptance of smart-cards.