Chip and PIN (EMV) is the main payment protocol for credit transactions in Europe. It is a big deal. The problem is that the cardholder authentication step is n

Chip and PIN (EMV) is the main payment protocol for credit transactions in Europe. It is a big deal. The problem is that the cardholder authentication step is not properly tied to the bank authorization. Instead the bank only finds out "verification succeded" without knowing which type of verification was used (signature or PIN). In particular, the MITM between the card and terminal does not interfere until the Terminal tries to send the PIN to the card. It blocks this message and instead says: (As Card) "Dear Terminal, the entered PIN is ok" (As Terminal) "Dear Card, let's assume I took a signature and continue straight on to authorizing the transaction" I think the best decision would have been for the card to include the authentication method as part of the MAC for the transaction (PIN, signature, etc.) In particular, if the TVR message had the auth type requested (not just error codes), it would be MACd in the ARQC message and the bank could verify if the Terminal is lying in saying the card verified the PIN ok.