PAYMENT SOLUTIONS
An Introduction to EMV
Presented to:
Government Finance Officers Association
of South Carolina
Date: May 4, 2015
First: The Proverbial Question
Issuers
PAYMENT SOLUTIONS
Acquirers
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The Race is On: Agenda
 Alphabet Soup: Definitions
Chip Cards, EMV, NFC
 EMV: What is Driving Adoption
Statistics, Fraud, Compliance, Innovation
 Encryption and Tokenization
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Alphabet Soup: Definitions
Chip Card
EMV
Smart Card
NFC
Chip + PIN
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The Card Came First
 A chip card is a device that includes a
secure, embedded integrated circuit chip (ICC)
Invented in 1977 by Honeywell Bull
Performs functions that validate, store, and encrypt data
 Data is more secure on a chip-embedded card that utilizes
dynamic authentication rather than on a static mag-stripe card
Mag-stripe card can be copied (“skimmed”)
Chip technology combats counterfeiting by assigning a dynamic
value for each transaction and preventing copying
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Form Factors
Contact
1.
2.
3.
Chip is embedded in a card
A contact card is inserted into a smart card reader
The contact points on the chip make contact with
the card reader
Contactless or Near Field Communication (NFC)
•
•
•
The chip may be embedded in cards, key fobs,
stickers, mobile phones, tablets, Apple Pay devices etc.
A contactless chip requires close proximity to a
reader (“tap and go”)
Both the chip and the reader have an antenna and they
use an RF (radio frequency) signal to communicate
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The Standard Followed
 EMV was established in 1994 by Europay, MasterCard and Visa
 EMVCo’s primary purpose is to define a global standard for credit
and debit payment cards based on chip card technology.
 Cards can be Contact or Contactless
 Four main functions:
Card authentication to protect against counterfeit cards
Cardholder verification to protect against lost/stolen cards
Terminal authentication to prevent against “Trojan Horse” hacks
Transaction authorization using issuer-defined rules
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EMV Authentication and Verification
 Authentication and Authorization Methods
• Online requires the transaction to be sent online for the issuer to
authenticate the card and authorize the transaction
• Offline is done between the chip card and terminal
 Cardholder Verification Methods (CVMs):
• None (usually used for low value transactions)
• Offline PIN (entered and stored PIN are compared offline)
Online PIN (PIN is validated online – like PIN debit)
Signature Verification (requires physical signature comparison)
 Visa and MasterCard mandate global interoperability: POS
solutions must be able to support all authentication &
verification methods
 Mexico chip card will prompt for signature; UK for PIN
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Innovation Could Win the Race
 NFC (Near Field Communications) is a radiobased interaction protocol compatible with
contactless payment standards
 NFC chips are embedded in mobile phones
(Apple Pay) and allow the phones to act as
card
 The “promise” of Apple Pay is driving
innovation and EMV adoption
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EMV: What is Driving Adoption?
Statistics
Fraud
Compliance
Innovation
Globalization
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EMV by the Numbers
 Worldwide Adoption
1.5 Billion payment cards*
20 Million POS terminals*
40% of cards and 70% of terminals are EMV
 U.S. Adoption – What it will mean financially
15 million point-of-sale devices = $6.75 billion to replace
360,000 ATMs = $500 million to upgrade (target date is 10/2016)
609.8 million credit cards & 520 million debit cards = $1.4 billion to
reissue
(Cost of mag-stripe card = 15 cents vs. EMV card = $2 - $4)
 Hence the U.S. “Chicken & Egg” conundrum!
Unlike most countries where banks own the terminal assets, the U.S.
will require merchants to make the investment
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*As of 2011
Fraud Migrates to U.S.
84.4% of cards
94.4% of terminals
14.5% of cards
68.1% of terminals
28.2% of cards
51.4% of terminals
20.6% of cards
75.9% of terminals
41.1% of cards
76.7% of terminals
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Fraud Reduction Stats: UK Example
Fraud on debit and credit cards fell by more than
25% from 2008 to 2010
Counterfeit card fraud —skimming and cloning—fell
by over half
Fraud on lost and stolen cards is
at their lowest levels in 10 years
Source: The UK Card Association
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Key EMV dates from Card Brands

October 2012: TECH Innovation Program (TIP) - PCI validation relief for
Level 1 and Level 2 merchants that adopt dual-interfaced solutions in any
year that at least 75% of the merchant transactions originate from a chipenabled terminal

Note: must be capable of actually processing EMV cards and NFC
contactless payments; merchants cannot just install “EMV ready”
equipment. . . .so, not really happening!

April 2013: Acquirer Chip Processing Mandate - Acquirers and processors
must demonstrate the ability to process EMV transactions and NFC
contactless payments

October 2015: Liability Shift from Issuer to Merchant - Merchants of any
size will be liable for domestic and cross-border counterfeit fraud
committed at the point of sale if they are not using a compliant EMV & NFC
POS solution (Automated Fuel merchant liability shift in 2017)
© 2012 VeriFone Systems, Inc.
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“Liability Shift” will Drive Adoption
 A non-compliant merchant is
liable for fraud that occurs on
any chip card used on a
magnetic swipe terminal.
 A non-compliant issuer is
liable for fraud that occurs on
any magnetic stripe card used
on a chip card-enabled terminal.
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What is “Liability Shift”
Liability for the chargeback loss shifts to whichever party hasn’t upgraded to
chip, if the use of such a device could have prevented the fraud from occurring
Issuers that have not migrated to EMV will be liable for fraud at EMV devices,
including transactions using listed card numbers
Acquirers that have not placed EMV + PIN devices will be liable for fraud on chip
cards, including transactions authorized online by the Issuer
Merchants can benefit from liability shift just by installing contact EMV terminals.
No impact on the customer
Fraud impacted by the Liability Shift is called “Designated Card Present Fraud”
The following fraud types are excluded from the liability shift:
Card Not Present Fraud
Account Takeover
Fraudulent Application
Source: Oberthur 2010 and “Overview of EMV Chip Impacts on Chargebacks” VISA March, 2011
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Magnetic Stripe vs EMV Transaction
Magnetic Stripe Transaction
Card is swiped, inserted, or dipped, and is
returned to cardholder after magnetic stripe
data has been read
There is no interaction between card and
terminal after magnetic stripe has been
read
Card does not generate a cryptogram
Online request message contains no EMVspecific data
Host does not perform any EMV-related
processing
Online response message contains no
EMV-specific data
There is interaction between card and
terminal at the end of the transaction
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EMV Transaction
Card must be inserted and remain in the
terminal for the duration of the transaction
Data is exchanged between card and
terminal to initiate the transaction
Chip card generates a unique cryptogram
which is sent to the host for verification
Additional EMV-specific data is in the
online request message
Additional processing is required by host
to verify request cryptogram, generate
response cryptogram, and interrogate
additional EMV-specific fields in the
request message
Additional EMV-specific data is in the
online response message
Data is exchanged between card and
terminal at the end of the transaction
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Elavon Solutions for EMV
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EMV Terminals: VeriFone VX Evolution
 VX820
 VX520
•
•
•
•
•
•
Hand-Over
Design
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• Customer Facing
Countertop
Dual Comm
Internal PIN pad
MSR
EMV
NFC
•
•
•
•
EMV
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NFC
PIN pad
Vx520
MSR
EMV
NFC
EMV Terminals: Ingenico Telium2
 iCT250
 iPP320
• Countertop
• Dual Comm
• Internal PIN pad
• MSR
• EMV
• NFC
• Customer Facing
PIN pad
• iCT220 or iCT250
• MSR
• EMV
• NFC
 iWL250G
• Portable - GPRS
• Internal PIN pad
• MSR
• EMV
• NFC
• 3G Technology
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 iCT220
• Countertop
• Dual Comm
• Internal PIN pad
• MSR
• EMV
iCT250
EMV
Magstripe
Contactless
Backlit 19 key
18+ LPS printer
Dual IP & Dial
Dual Processor
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Cable Management
Small Footprint
NFC
Sharp Color Display
Privacy Shield
iPP320 Countertop PIN Pad
EMV
Embedded Contactless
Connects to Telium Countertop Line
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iWL250
Small Footprint
Lightweight
Charging & Comms Base
30 LPS Thermal
Printer
25mm & 40mm
Paper Roll Option
Contactless
3G Wireless
GPRS
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Dynamic SIM
30 LPS
Printer
Contactless
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Smart Card
Li-Ion
Battery
Lightweight
Conclusion
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Points to Remember
 EMV is a standard that dictates the interaction between a
smart (chip) “card” and a POS payment device
 The “chip” stores encryption data that is used during the
transaction to prove the card is authentic; it prevents cloning
 EMV chips can be either contact or contactless and are read &
write capable
 NFC (Near Field Communications) is a radio-based contactless
interaction protocol that is driving interest in EMV adoption
 The Card Brands have announced EMV incentives (carrots and
sticks) that encourage issuers, acquirers, and merchants to
adopt EMV
© 2012 VeriFone Systems, Inc.
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EMV Benefits All Parties
MERCHANT
• Fewer fraud-related chargebacks due to stolen
cards/skimming
• Increase in international customer satisfaction
BENEFITS
ISSUER
• Fraud reduction
• Global interoperability
• Mobile payments facilitation
CARDHOLDER
• Peace of Mind (fraud reduction)
• Never lose sight of their card
• Global interoperability
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PCI – Tokenization - Encryption
What is the difference between Security and PCI? PCI-DSS compliance is one aspect of an overall
security program but on its own cannot prevent a data breach. Security measures such as encryption and
tokenization provide additional layers of protection as part of a security program.
What is “Point-to Point” vs “End-to-End” Encryption? They are really the same and have been
used interchangeably. Since P2PE certification is available and Visa has announced their encryption program,
some distinction is made in the market. Point to Point refers to encryption at the time of the swipe and
decryption at a gateway of payment processor. End-to-End refers to encryption at the time of the swipe and
decryption at the furthest end point in the payment processing stream, i.e. the payment brands data center.
What is Tokenization vs Encryption? Encryption is generally used in card-present situations while
tokenization is generally used in card not present scenarios like “card on file” and recurring billing. Encryption
scrambles a card number so that the data is not usable to thieves. The card number can only be decrypted by
the holder of the key. Tokenization is an ALIAS or “token” of the card number.
If a customer is using encryption and/or tokenization do they have to be PCI compliant?
The short answer is YES utilizing encryption and/or tokenization does not remove the requirement for PCI-DSS
compliance. However, depending on the solution implemented, a customer could experience reduced effort,
scope and/or cost when they do complete their annual PCI assessment
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Your EMV Call to Action: Don’t Wait
 Read and research to keep up with EMV and NFC
trends
• http://www.smartcardalliance.org/
• http://www.emvco.com/
• http://www.cscu.net/index.aspx?CategoryID=294
• http://pymnts.com
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EMV – Action Required
 Effective October 1, 2015, a date that has been determined by the credit card
associations (MasterCard/VISA) if your business accepts and processes a
counterfeit transaction from an EMV card on a non-EMV enabled terminal,
the liability for that transaction is yours.
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Thank You!
Brad Hench
Regional Sales Manager
US Bank Merchant Solutions
678-731-4419
Bradford.hench@usbank.com
Paul Anatrella
Vice President & Relationship Manager
U.S. Bank
704-335-2825
Paul.anatrella@usbank.com
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