Contactless Payment Cards Move Forward

Britain's David Birch, director of Consult Hyperion, reports on the latest developments in contactless payment systems in an article that appeared recently on Principia. He also reviews the associated security and privacy implications. I recommend you read the whole piece, since it is a thorough look at an important new technology; but here are some morsels to pique your interest:

‘The announcement of schemes such as MasterCard's Paypass, American Express ExpressPay and Visa's contactless initiatives is a sign that contactless smart cards are moving out of mass transit (e.g. London's Oyster card) and into the mass market.

‘Indeed, Datamonitor have forecast that the market for these ‘payment tokens’ will grow at 47 per cent per annum over the next five years. The international payment schemes’ interest is obvious. At a time when it's hard to explain to a consumer why a contact smart card (such as the ‘chip and PIN’ payment cards being deployed around the world) is better than a magnetic stripe card, payment tokens immediately differentiate themselves by offering a completely different (and significantly more convenient) consumer experience.

‘Why? Because the token needs only to be waved close to the terminal. In many cases, it will work fine while still in a bag or briefcase providing it is close enough to the terminal. The distance depends on the type of device used; the type of ‘proximity interface’ chip being discussed in this article will work up to a few centimetres from the terminals…

‘Nokia have said that they think payment tag technology is better than Bluetooth or Infra-red for mobile payments and, in Japan, NTT DoCoMo and Sony have formed a joint venture (FeliCa Networks) to develop a version of the Sony FeliCa contactless chip for embedding into mobile phones and to operate the FeliCa platform for m-commerce. For many consumers, this will be the ultimate in convenience because the phone provides the communications link for managing the payment account as well as the physical payment device. The dreams of the mobile payment community will come true, but not in the way that they thought.

‘Payment tokens

‘So how do payment tokens work to deliver the appropriate levels of both security and privacy? To answer this question, it's necessary to understand how they work. In the general case, the payment token comprises a microprocessor with hardware support for cryptographic operation and an RF interface. There are various standards in this space, but the one most widely used for payment tokens at present is ISO/IEC 14443.

‘In a typical retail environment the retailer's point-of-sale (POS) terminal and the payment token both contain a microprocessor; the microprocessors communicate using a payment protocol (on top of the ISO 14443 protocol for basic data exchange).

‘When it is time to pay, the customer brings their tag close to the POS terminal. The terminal interrogates the card and gets back the serial number and a cryptogram (a one-time code calculated inside the token). It feeds these to the acquiring bank, which passes them back to the issuer. From the serial number, the issuer knows which account to authorise and from the cryptogram the issuer knows that the token is valid.

‘The cryptogram is made up from the serial number and a transaction counter, encrypted using the token security key. This key is inserted in the token during manufacturing; it is derived from the serial number and a bank master key. Once in the token, it is never divulged. This kind of solution provides:

  • Privacy, because the token ID is meaningless to anyone other than the issuing bank which can map that ID to an actual account or card number;
  • Security, because knowing the token ID is insufficient to create a cloned token. Also, a cloned token would not generate a correct cryptogram because it would not have the right security key and if the transaction is replayed the transaction counter will be wrong.

‘Please note that this is an example given for the purpose of discussion; it is not meant to represent any of the operational schemes discussed in this article. The security of this typical example scheme is not absolute. There is no cardholder verification (i.e. a signature or a PIN), but all transactions are authorised online, so a lost or stolen card can be blocked as soon as it is reported (although it has to be said that consumers will generally notice the loss or their keys or mobile phone pretty quickly). For this example scheme, it might be useful to add an online PIN only for transactions above £20 or so. ‘

The attention to privacy considerations in these scenarios is essential.

How many users of public transit would want to generate a computerized record of every place they have gone, the time of day they have traveled, and how long they have remained there – throughout their lives?

If the use of the tokens generalizes and they become an important method of payment, it becomes easy to combine this information with the rest of an individual's purchasing history, potentially including everything from books and magazines to digital media.

Is it is true you would have to ask the issuing authority about who had purchased the contactless tracking device? I don't think so. What if you had some other way to establish the link between the device and the user's identity? For example, requiring another piece of identification – even once – and using it to perform the association.

So in my view, these scenarios call for a more sophisticated cryptographic approach than that used as an example by David. To be clear, in his very imformative article, he certainly leaves such alternatives open. I can understand that in introducing the technology he didn't want to get diverted into a privacy threat analysis.

There are well known mechanisms for doing everything described here while making it impossible to distinguish one individual device from another unless it is being misused (e.g. has been cloned in an attempt to defraud). Let's use them.

Given problems such as terrorism, there may be some who think a fixed tracking ID could be used to monitor the travel of criminal elements. We should make it clear that this won't work for very long.

Criminals will soon come to understand the need to “cover their tracks”. They will gain access to alternate (fraudulently obtained or freshly stolen) tokens and employ the alternate tokens in endeavors that require secrecy. In this case tokens may actually make it easier for criminals to dissimulate their activities. Only bottom rung vandals, those prone to unpremeditated stupidity, and ordinary citizens can be monitored through this type of technology.

Worse, continuing to promulgate fixed beacon technology is a bit like doling out Cruise missile guidance systems to enemy agents. They allow terrorists and agents of organized crime to mount increasingly accurate surgically directed attacks.

Even if someone could imagine a scenario where fixed-beacon tracking were useful enough to justify the security and privacy problems it causes, there are ways the same high level goals could be met without endangering the privacy of the whole population. For example, it is possible to encrypt the fixed identifier of the device under a key which can only be accessed through a highly controlled process – and include the encrypted identifier in the cryptogram which is otherwise anonymous. This would make it possible, in specific circumstances approved by the courts, to follow individual itineraries, without compromising the privacy of every single user of the system by tying identifiers into mineable records.

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Kim Cameron

Work on identity.