Banking industry insiders come to rescue Chip and PIN
February 18, 2010
Early this morning, various banking industry electronic security suppliers have grouped up to defend the latest Chip and PIN security breach, following the release of research last week from Cambridge University demonstrating how cybercriminals can potentially bypass tough security controls on credit and debit card transactions on eCommerce sites as well as in physical stores.
The team from Cambridge University demonstrated how it is possible to make "Verified by PIN" transactions using a stolen (but unconcealed) credit or debit card without even knowing the correct PIN number.
The so-called man-in-the-middle breach works by simply tricking a card into thinking a chip-and-signature transaction is taking place while the terminal gets a signal that a correct PIN has been entered.
Would-be criminals would then need to simply insert an "electronic wedge" between the stolen card and the cc terminal, tricking it into believing that the PIN was verified and was still valid.
The attack even works when the terminal is offline but isn't applicable to ATM machine cash withdrawals. It relies on the complexity and security shortcomings of the EMV (Eurocard Mastercard Visa) standard for smartcard payments, a technology used by millions of credit and debit cards, mostly in Europe. In the U.S., the system used there seems less vulnerable, at least for now.
Cambridge University researchers easily demonstrated the attack on several cards during a news item on the BBC's Newsnight. The program aired Feb. 11, ahead of the planned publication of a paper at an IEEE conference in May.
Electronic banking security firms such as Thales and The Logic Group point out that 'Chip and PIN technology' has been a real success in driving down the levels of fraud in retail transactions, while acknowledging that plastic card fraud has still been displaced to the Internet and overseas ATM machines, rather than reduced, since the introduction of Chip and PIN.
Jay Abbott, a security consultant at PricewaterhouseCoopers says “currently, the customer is accountable for the fraud as banks argue that PIN verified transactions are in fact secure. Given this attack demonstrates a clear method of bypassing the PIN system altogether, this assertion by the banks stands on shakier ground, and probably wouldn't hold up in a court of law.”
While security firms are keen to downplay the significance of the Cambridge team's research, other observers argue that it still undermines the insistence of banks that any transactions authorised by a PIN must have been either made by a customer or happens to be the product of their negligence in keeping their cards and PIN numbers secure.
Steve Brunswick, strategy manager at Thales Information Systems Security, whose technology helps secure about seventy per cent of credit and debit card transactions globally, argues that Chip and PIN offers "proven benefits" not undermined by the Cambridge team's work.
The Cambridge University team has developed a "very effective and simple way of exploiting weaknesses in the system," Abbott said. He added that even so, pulling the attack off in practice would be far from straightforward.
Abbott added “an overall number of electronic components are involved that require concealment, therefore the criminal must remain in contact with the card at all times. A simple process change by the retailer of asking for the card holder to hand over the card would break the "circuit", although this possibility can be eliminated if the card reader is fixed to a point on the other side of the counter."
“Overall, one of the motivations for introducing Chip and PIN in the first place was to offer consumers extra protection by limiting the chance of a sales assistant being able to “skim” the card and duplicate it for fraudulent purposes. It's also important to note that this only affects transactions where the fraudster visits the retailer in person and doesn't work online or on ATM transactions, where different forms of authentication are required," Abott said.
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