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Previous lecture • Diffie-Hellman key agreement • Authentication • Certificates • Certificate Authorities Mårten Trolin

Today’s Agenda – Smartcards • The problem we want to solve • General information on smart-cards • New possibilities • Transaction overview • EMV Mårten Trolin

Problems with Magnetic Stripe • 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 Mårten Trolin

What Is a Smart-Card • A smart-card is a small computer • Often placed on a credit-card sized plastic card • Can have contacts or be contact-less • Has a well-defined interface • Can have secret information that is protected from direct access • First appeared in the 1970s Mårten Trolin

Advantages with Smart-Cards • 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 Mårten Trolin

New Functionality • Off-line risk management • Can be configured at an individual level • Off-line card-holder verification • PIN stored on card • Resistant to skimming attacks • Transactions cryptographically authenticated • Reduces fraud rate Mårten Trolin

Off-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. Mårten Trolin

Card Authentication to Terminal • 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. Mårten Trolin

Online 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. Mårten Trolin

Smart-card Transaction Flow Card Terminal Acquirer Issuer Card – terminal interaction On-line authorization (conditional) Card – terminal interaction (if after online authorization) Transaction data transfer (possibly including declined transactions’ info) Mårten Trolin

Interaction between Card and Terminal • Cards authenticates itself to the terminal • Offline 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 Mårten Trolin

Interaction between card and 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 Mårten Trolin

Interaction between Card and Terminal, Part 2 • Based on the result from the issuer, transaction is either approved or declined. Mårten Trolin

Interaction between card and 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. Mårten Trolin

Post-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 Mårten Trolin

Scripts • 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 Mårten Trolin

EMV – Europay, MasterCard, 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 Mårten Trolin

EMV 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 Mårten Trolin

Summary • 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. Mårten Trolin

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