Dynamic Credit Card - image from Ars Technica
By Simon Gamble
The annual Consumer Electronics Show (CES) in Las Vegas always features a few technologies that get people excited, and this year’s recently concluded edition proved no exception. While the vast majority of the new tech toys on display were more conventional consumer items like TVs, phones and computers, what grabbed my interest this year was a new credit card from a company called Dynamics Inc. that’s debuted some new technologies designed to thwart card fraud.
Banks and technology companies have known for some time that the technology used to encrypt credit cards is in dire need of updating. The magnetic stripe on your debit or credit cards is based on technology first developed nearly 60 years ago. There’s arguably no other technology we use today that hasn’t seen a major upgrade in such a long time.
Fraudsters have since developed techniques to quickly and easily steal cardholder data from these magnetic stripes, perpetuating an international black market for card data that fuels a cybercrime industry estimated to be as large as the international drug trade.
To combat the fraudsters, banks and card companies have been developing a number of new credit card technologies to make it more difficult to steal valid card information. To date, the most successful has been a technology known as EMV (for Europay, MasterCard and Visa, the three pioneers of the technology), where a small microchip is installed on each card containing encrypted data. These microchips are supposedly impossible to clone or replicate, so without physically possessing the cards thieves can’t use the card data.
But EMV requires changes in the way cards are accepted at merchants, and in some markets like the U.S., the cost to replace all the payment terminals would be extraordinary. It’s not economically feasible, so magnetic stripes are still used on EMV cards as a backup. If the cards are swiped through a skimmer that takes the card details off the stripe, it’s game over.
To their credit, card companies have been trying a variety of technologies to make credit cards with one-time use codes, so that each card transaction is unique. Even if a fraudster was able to somehow steal the card information, without the correct code the data would be worthless.
A few years ago Visa and others tried to create cards with these one-time use codes, but after trials the cards never made it into the mainstream.
Other technologies, including one developed by BNZ called ‘liquid encryption’ have also been tried to limit the potential window during which card data remains valid. In liquid encryption, card details are changed and re-written every time a card is used in a BNZ ATM machine. Therefore any stolen card information would only be valid for a limited time.
The new card from Dynamics features some element of all these technologies, plus a few more. Each card self-generates a one-time use code for each transaction that changes six digits in the card account number. The card details are therefore valid only for one transaction, so even if fraudsters grabbed the digits they’d be unable to use it for any future transactions.
What makes this card unique however is that it contains a self-wiping magnetic stripe on the back, so it behaves exactly like a regular credit card in retail scenarios. You swipe it just like a traditional card, and after the transaction completes, the card erases the information in the stripe.
Not only do these new cards reduce the risk of card details being stolen at the Point of Sale, they also help limit exposure if a data breach were to occur at a merchant later on where card details were exposed. Since each card number is only valid for one transaction, the usefulness of that card data to a potential criminal would have long since expired.
No doubt these card technologies will only stay current for a limited time, and fraudsters will be working on ways to defeat them. But for the time being, it’s good to see that the threats of fraud are being taken seriously and new developments are underway.