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> For years, consumers in Europe and many other countries have used a technology called EMV (for Europay, MasterCard and Visa), created in the mid-1990s that ma

> For years, consumers in Europe and many other countries have used a technology called EMV (for Europay, MasterCard and Visa), created in the mid-1990s that makes it possible for retailers to confirm payments locally instead of placing a call to your bank. That’s possible because of a chip on the card that requires you to tap in a PIN code at the point of purchase. Simple. Safe. Secure. Nope. All that proves is that you own the card. It doesn't imply that the transaction is worthy of approval by the bank. It needs to be a three-way conversation between the merchant, you, and your bank. The merchant is represented by his POS. You are represented by your phone. And the bank sits somewhere in the cloud. The merchant presents the bill to your phone. You approve the charge by entering a code on your phone. Then the bank approves your approval, and the transaction is complete. Everything is encrypted, and there is nothing to skim.

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- cynwoody 13y ago
  Chip & PIN only solves part of the problem: authenticating that you are you. You could still be a deadbeat. There are three parties involved: the merchant, you, and the bank. You are ordering the bank to transfer funds to the merchant. Naturally, the bank has a say in the matter. After all, you might or not be able to afford the shiny Maybach. To keep out hackers, the whole interaction needs to be strongly encrypted. That requires the merchant, you, and the bank to be able to communicate securely. Mag stripes are not secure. But your phone, provided you are not a complete ditz, offers hope. Merchant presents bill to your phone. You approve (or not — maybe you stole the phone and don't know the code). Merchant presents your approval to the bank. The bank approves or declines, and the transaction completes or it doesn't. Eavesdroppers can intercept the encrpted interactions but can't replay them with any effect other than to raise alarms. Why isn't something like the above already in place? Because it will cost a bundle to convert, and current credit card fraud rates are at the single-digit basis point level. Actually, the reason improvements like chip and pin are not prevalent in the US is that the US has historically had better datacomm than other places, so the need to authenticate offline was less urgent. At least, that's the excuse I've heard.
Anechoic 13y ago
The merchant presents the bill to your phone. You approve the charge by entering a code on your phone. This requires a) having a mobile phone, and b) having a properly-working mobile phone (battery charged, able to receive a signal, etc). That's a lot to ask for a lot of people in a lot of locations. If a device representing a third party is requires, we'd be better off with an RSA-type key fob.
- cynwoody 13y ago
  That would also work, although there would be the problem of stolen key fobs. The point is not to have replayable data streams (mag stripes) available for interception and abuse.

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cynwoody 13y ago
Chip & PIN only solves part of the problem: authenticating that you are you. You could still be a deadbeat. There are three parties involved: the merchant, you, and the bank. You are ordering the bank to transfer funds to the merchant. Naturally, the bank has a say in the matter. After all, you might or not be able to afford the shiny Maybach. To keep out hackers, the whole interaction needs to be strongly encrypted. That requires the merchant, you, and the bank to be able to communicate securely. Mag stripes are not secure. But your phone, provided you are not a complete ditz, offers hope. Merchant presents bill to your phone. You approve (or not — maybe you stole the phone and don't know the code). Merchant presents your approval to the bank. The bank approves or declines, and the transaction completes or it doesn't. Eavesdroppers can intercept the encrpted interactions but can't replay them with any effect other than to raise alarms. Why isn't something like the above already in place? Because it will cost a bundle to convert, and current credit card fraud rates are at the single-digit basis point level. Actually, the reason improvements like chip and pin are not prevalent in the US is that the US has historically had better datacomm than other places, so the need to authenticate offline was less urgent. At least, that's the excuse I've heard.

Anechoic 13y ago

The merchant presents the bill to your phone. You approve the charge by entering a code on your phone. This requires a) having a mobile phone, and b) having a properly-working mobile phone (battery charged, able to receive a signal, etc). That's a lot to ask for a lot of people in a lot of locations. If a device representing a third party is requires, we'd be better off with an RSA-type key fob.

cynwoody 13y ago
That would also work, although there would be the problem of stolen key fobs. The point is not to have replayable data streams (mag stripes) available for interception and abuse.