There are several threats around the payment card industry (PCI) receiving wider public scrutiny now that the chip-and-PIN standard is set to become mandatory in the U.S. by Oct. 1, 2015. The Europay, MasterCard and Visa (EMV) standard is being implemented after years of use in Europe, and it will institute a liability shift whereby the party causing a fraudulent transaction will be responsible for losses.

PCI Will Still Have Vulnerabilities

EMV is seen by many as the logical starting point when building secure online banking paths that are sure to keep you updated and ready for changes and evolving attacks long-term. However, researchers from University of Cambridge have detailed two major problems about the implementation of such a standard and its potential flaws, which may affect the public’s positive view of the standard.

The first implementation flaw describes how EMV cards generate what is supposed to be an unpredictable number for each transaction to ensure its integrity. However, the implementer could have used counters, time stamps or homemade algorithms to supply this figure. Consequently, an attacker would be able to identify computation patterns that would allow him or her to predict the randomly generated numbers. This so-called preplay vulnerability could be exploited by cybercriminals to clone credit and debit cards in such a manner that even bank procedures won’t differentiate between legitimate and fraudulent transactions.

The second vulnerability discovered involves protocol implementation. An attacker can swap out the number generated by an ATM or payment terminal with one from a cloned card, even when a cryptographically strong random number is generated. That flaw is due to attackers’ ability to intercept the random figure via a man-in-the-middle (MitM) attack and replace it with a different one, which would likely pass the authorization process with no issue. Such an attack could be executed via malware installed on point-of-sale (POS) devices, even if those devices include tamper-resistant EMV modules. A good example is the Dexter malware, which infects POS systems worldwide and remains active at the time of writing this article.

Finding Solutions to PCI Threats

The above threats give us an idea about how creative cybercriminals can be in their attempts to take advantage of flaws and vulnerabilities caused by poor implementation by banks and vendors. It is difficult to enforce standardization and high-quality, secure development, leaving the door open for attacks.

Threats and vulnerabilities are being discovered and developed at an alarming rate — faster than fixes and solutions to prevent them. If EMV proves to be inefficient in the coming months, in five years we can expect a PCI standard overwhelmed by advanced threats and overcome by customer needs.

In contrast, emerging payment technologies could be the solution that moves us forward to the next generation of online transactions. Companies like PayPal, Leaf, Square and others want to compete in this market. To do so, they are introducing mobile and cloud services that offer a bridge between online and offline worlds by pairing mobile registers and additional merchant services with smartphones.

The next generation of threats requires a new approach to PCI security. As these threats evolve, so must the security strategies used to combat them. Let’s move away from security based on compliance and look forward to strategies that provide better understanding of the technologies used to protect data in order to build solutions that take us into the future of information security.

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