Hot Topics in Payments Dallas AFP Oct. 16, 2014

Transcript:Hot Topics in Payments Dallas AFP Oct. 16, 2014:
Hot Topics in Payments Dallas AFP Oct. 16, 2014 Matt Davies, AAP, CTP, CPP Federal Reserve Bank of Dallas 1 EMV “EMV” = Europay, MasterCard, and Visa 1994: Founded the global standard for credit and debit payments based on chip card technology. Today, EMV standards are set by EMVCo, a joint venture of Visa, MC, AmEx, JCB, Discover and UnionPay. 2 EMV “Chip cards,” “chip and PIN cards,” and “smart cards” are used interchangeably. Plastic cards that contain a microchip that sends a dynamic protected value unique to each transaction Though “chip and PIN” is often used with EMV, the standards allow for cardholder verification via signature (PIN is most common in other countries). U.S. implementation: “chip and choice” 3 EMV EMV standards have been adopted in many other countries U.S. is one of the last developed nations to implement Reluctance due to high cost of upgrading payment terminals, or buying new ones, to accept chip payments. Card issuers must reissue all credit and debit cards Cost of terminal and card migration may be as high as $12bn (Javelin). 4 EMV Two Ways of Accepting Chip Card Payments Contact (“dipping” the card): Cardholder inserts card into POS device. Card remains in device until completion of the transaction. If customer removes card before the charge is approved, the transaction will fail and the customer will be required to provide the card again. Contactless (“tap-and-go”): Cardholder waves the card by the chip card-enabled POS device to provide payment information. Once the transaction has been authorized, customer might then be prompted to enter PIN or sign a receipt. Dynamic Authentication When traditional mag-stripe cards are swiped at POS terminal, data, such as primary account number (PAN) and expiration date, are transmitted to the card issuer. The data—known as static data—remains the same for each transaction. EMV relies on dynamic authentication: chip generates data unique to each individual card transaction. Dynamic Authentication In EMV transactions that use dynamic auth., the chip is a mini computer that generates a unique cryptogram using transaction data each time the card is inserted into the chip terminal. The cryptogram is sent to the card issuer, which uses its keys and codes to calculate a cryptogram based on the same transaction data. If the two cryptograms match, the issuer knows the data is from a valid card. Effectively, you have a different number being sent each time. Dynamic auth.