Chip and PIN: Making Online Payment More Robust aDecember 2013
Online Payments and Its Challenges The emergence of ecommerce has provided consumers with the opportunity to shop online by logging on to an online merchant’s website from the comfort of their home. Traditionally consumers used bank cards (credit cards or debit cards) to pay for their online shopping on merchant websites. Such transactions required customers to provide some bank card related information such as card number, account number, name of the account holder, expiry date of the card, CVV number, etc. Over the years online payment transactions by using bank cards have been a major target for fraudulent activities. Card not present (CNP) transaction is a transaction where a merchant cannot physically inspect the bank card, hence the term “card not present” was coined. CNP transactions include purchases made through online, telephonic or mail orders. Hence online transactions may lead to payment fraud – involving the unauthorized use of a bank card related details to purchase products or services online. While merchants delivered the products or services under the impression that the cardholder authorized the purchase and will be making the required payments, in reality, the same would not happen and merchants would lose their earned revenue.
CNP fraud statistics
*Note: Data collected between January 2011 and September 2012. Data based on credit card related fraud. CNP transactions include online, telephonic or mail orders.
Chip and PIN Technology Evolution Bank cards traditionally have a magnetic stripe containing cardholder information. One of the biggest challenges with these magnetic stripe bank cards is that the cardholder information stored is static information and can be obtained by fraudsters – from a stolen bank card or a from a rigged or stolen
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payment terminal. Fraudsters can then make clones of a bank card and use them for online transactions. As a result, not only consumers but also retailers are at risk of being conned by fraudsters and may lose money in order to make good the loss to the aggrieved party (Retailer or Consumer). Although there are some cardholder authentication processes such as ‘MasterCard SecureCode’ and ‘Verified by Visa’, these solutions have their own share of security lapses – if a person forgets his/her login password, he/she can easily apply for a new password. Similarly, a fraudster in possession of a stolen card can also verify the identity of the cardholder and can easily acquire a new password. Over the years, the payments industry has been working to secure itself from bank card payment fraud. Along this journey, Chip and PIN cards have been a revolutionary solution for minimizing the risk of fraud while making payments using bank cards. Chip and PIN cards are bank cards which contain an embedded microcomputer chip that holds cardholder’s Personal Identification Number (PIN) data. To use this card, a customer must enter his/her PIN to complete a transaction. Additionally, the chips are harder to clone, reducing the likelihood of fraud. In addition, the information stored in the chip is dynamic as compared to static information stored in the magnetic stripe card.
Some Benefits from the Online Chip and PIN Technology
Chip and PIN Device for In-home Ecommerce Chip and PIN cards are being used in Europe, mostly in the Western European countries for over a decade, now. They are also being used in Asian countries and to some extent in the US. Until recently the Chip and PIN cards have been used by consumers for payments other than online. A UK based company, Secure Electrans has innovated and developed HomePay a Chip and PIN card reader to facilitate in-home ecommerce and Mobile Chip and PIN payments. Chip and PIN: Making Online Payment More Robust
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Features of HomePay
How HomePay Works
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Graphic Showing Chip and PIN Payment Option for Online Transactions
Outlook Secure Electrans is currently working to market their revolutionary HomePay device for in-home ecommerce and Mobile Chip and PIN payments. They are yet to decide on how the device should be rolled out in the market – i.e. the device be bought by retailers, banks or consumers to protect online payment transactions. Currently some banks like Barclays and NatWest have offered their customers inhome Chip and PIN card readers for making online banking transactions. Hence banks could be an initial target for marketing the HomePay device.
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