News & Views - Savantor

More on Chip & PIN

Thursday, 01 June 2006

The security of the UK 'Chip and PIN' scheme has been the target of many comments in the press over the last few weeks.  Much of which, whilst it may have an element of truth, has been considerably exaggerated by the media into what amounts to scaremongering.  The banks are always an easy target and whilst some criticism aimed at them may be justified a little common sense applied to the EMV scenarios would not be amiss.  The initial implementation of EMV in the UK was never intended to be a once and for all answer to card fraud, but simply the first step along that road.  At the time of its introduction it was the best fit solution and it was always likely that for example DDA would have been implemented in the second generation issue in 2007/8.

Of the 6.2 billion card transactions in the UK each year, one in five occurs offline, which increases the risk of cloned cards being used at a retailer's POS terminal. In short, a cloned credit or debit card may go unidentified if a transaction is not sent to a bank for approval. The UK's banks have been criticised for issuing EMV cards that use static data authentication (SDA) instead of dynamic data authentication (DDA). POS terminals can only detect that a SDA card has been cloned if a transaction is authorised online, whereas DDA cards are set up to demand online authorisation.

APACS emphasises that as 80 per cent of the UK's card transactions are authorised online, the infrastructure has a high chance of identifying a cloned card, especially as the cardholder's PIN is still needed to make transactions. High-risk retailers tend to authorise all their card transactions online, and at retailers that process most card transactions offline, the system is set to randomly request that a transaction be authorised online. Similarly, SDA cards are automatically set up to randomly demand online authorisation for transactions on those cards.

The system is not perfect but it is not as weak as it is being portrayed and we believe we will see a move to DDA as costs of these cards reduce.  Together with a move to greater use of stronger authentication systems for on line purchases fraud will become increasingly more difficult and expensive to carry out which is the best way to deter the organised gangs from investing in it.

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