A Guide To EMV Chip Technology V2.0 20141120122132753

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Table of Contents
List of Figures
1 Introduction
- 1.1 Purpose
- 1.2 References
2 Background
- 2.1 What are the EMV Chip Specifications?
- 2.2 Why EMV Chip Technology?
3 The History of the EMV Chip Specifications
- 3.1 Timeline
- 3.2 EMV Chip around the World
4 EMVCo LLC
5 EMV Chip Technology – How it Works
- 5.1 Stepping Through an EMV Chip Transaction
  - 5.1.1 Steps for an EMV Contact Transaction
  - 5.1.2 Steps for an EMV Contactless Chip Transaction
- 5.2 EMV Chip Features
6 Testing and Approval
- 6.1 EMVCo Objective
7 Implementation Considerations
- 7.1 Issuer Considerations
- 7.2 Retailer and Acquirer Considerations
8 The Next Generation of EMV Chip Specifications
9 Glossary

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Table of Contents

TABLE OF CONTENTS .................................................................................................................. 2

LIST OF FIGURES .......................................................................................................................... 3

1 INTRODUCTION ................................................................................................................ 4

1.1 Purpose .......................................................................................................................... 4

1.2 References ..................................................................................................................... 4

2 BACKGROUND ................................................................................................................. 5

2.1 What are the EMV Chip Specifications? ........................................................................ 5

2.2 Why EMV Chip Technology? ......................................................................................... 6

3 THE HISTORY OF THE EMV CHIP SPECIFICATIONS ................................................... 8

3.1 Timeline .......................................................................................................................... 8

3.1.1 The Need for a Global Chip Card Standard ................................................................... 8

3.1.2 The Evolution of the EMV Chip Specifications ............................................................... 9

3.1.3 Common Core Definitions .............................................................................................. 9

3.1.4 Extending EMV Chip Technology to Contactless and Mobile ...................................... 10

3.2 EMV Chip around the World ........................................................................................ 11

4 EMVCO LLC..................................................................................................................... 13

4.1 EMVCo Mission ............................................................................................................ 13

4.2 Structure of EMVCo Management and Operations ..................................................... 14

4.3 The Role of the Payment Systems in Contrast to EMVCo .......................................... 15

4.4 EMVCo Relationship with Other Standards Bodies ..................................................... 16

5 EMV CHIP TECHNOLOGY – HOW IT WORKS .............................................................. 17

5.1 Stepping Through an EMV Chip Transaction .............................................................. 17

5.1.1 Steps for an EMV Contact Transaction ........................................................................ 18

5.1.2 Steps for an EMV Contactless Chip Transaction ......................................................... 18

5.2 EMV Chip Features ...................................................................................................... 19

5.2.1 Application Cryptogram ................................................................................................ 19

5.2.2 Risk Management and Authorisation Controls ............................................................. 20

5.2.3 Cardholder Verification Processing .............................................................................. 21

5.2.4 Offline Data Authentication .......................................................................................... 22

6 TESTING AND APPROVAL ............................................................................................ 24

6.1 EMVCo Objective ......................................................................................................... 24

6.1.1 Terminal Type Approval ............................................................................................... 24

6.1.2 Card Type Approval ..................................................................................................... 25

6.1.3 Chip Security Evaluation .............................................................................................. 25

7 IMPLEMENTATION CONSIDERATIONS ....................................................................... 26

7.1 Issuer Considerations .................................................................................................. 26

7.2 Retailer and Acquirer Considerations .......................................................................... 28

8 THE NEXT GENERATION OF EMV CHIP SPECIFICATIONS ....................................... 30

8.1 Business Drivers .......................................................................................................... 30

8.2 EMV Next Generation Specifications ........................................................................... 31

8.3 Milestones .................................................................................................................... 32

9 GLOSSARY...................................................................................................................... 33

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List of Figures

FIGURE 1: EMV CHIP SPECIFICATIONS TIMELINE .................................................... 8

FIGURE 2: PERCENTAGE OF CARD-PRESENT TRANSACTIONS THAT ARE EMV ........... 12

FIGURE 3: EMVCO INTERACTION STRUCTURE ..................................................... 14

FIGURE 4: PROCESSING STEPS FOR AN EMV CONTACT CHIP TRANSACTION ............. 18

FIGURE 5: APPLICATION CRYPTOGRAMS .................................................................. 19

FIGURE 6: RISK MANAGEMENT AND SCRIPT COMMANDS .............................................. 20

FIGURE 7: CARDHOLDER VERIFICATION PROCESSING ................................................. 21

FIGURE 8: OFFLINE DATA AUTHENTICATION ............................................................ 22

FIGURE 9: ISSUER EMV IMPLEMENTATION ACTIVITIES ............................................... 26

TABLE 10: ISSUER IMPLEMENTATION CONSIDERATIONS ......................................... 27

FIGURE 11: EMV ACCEPTOR IMPLEMENTATION ACTIVITIES ......................................... 28

TABLE 12: ACQUIRER IMPLEMENTATION CONSIDERATIONS ..................................... 29

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1 Introduction

1.1 Purpose

The purpose of this paper is to provide an overview of the specifications and

processes related to EMV chip products and transactions. The document is

intended to describe the “what” and the “why” of EMV chip technology within the

context of the wider payments industry.

Additionally, the document describes the role of EMVCo, LLC (EMVCo), and how

various payment industry stakeholders may interact with EMVCo to participate in

the ongoing management of the various EMV Specifications.

The document was first published in 2011, and this current version (released in

2014) has been updated to focus on the EMV Chip Specifications, as well as

reflect the growing ownership of EMVCo.

Information regarding other specifications published by EMVCo can be found at

www.emvco.com.

1.2 References

Information for this document has been drawn from several sources, including

the following:

 The EMVCo web site: www.emvco.com

 EMV Integrated Circuit Card Specifications for Payment Systems, version

4.3, November 2011 (EMVCo, LLC)

 EMV Contactless Payment Specification For Payment Systems, version

2.4, February 2014 (EMVCo, LLC)

 Type Approval Process Documentation for terminals and cards available

from EMVCo, LLC

 Issuer and Application Security Guidelines, v2.4, April 2014 (EMVCo,

LLC)

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2 Background

2.1 What are the EMV Chip Specifications?

The EMV Chip Specifications that encompass both Contact and Contactless

payments are global payment industry specifications that describe the

requirements for interoperability between chip-based payment applications and

acceptance terminals

to enable payment. The specifications are managed by

the organisation EMVCo.

Named after the original organisations that created the specification - Europay,

MasterCard and Visa - the EMV Chip Specifications were first published in 1996.

Approaching twenty years later, there are now over two billion active EMV chip

cards used for credit and debit payment, at over 35 million EMV acceptance

terminals deployed around the world

The distinguishing feature of EMV chip transactions is that the payment

application is resident in a secure chip that is embedded in a plastic payment

card (often referred to as a chip card or smart card), a

personal device such as a mobile phone or other form

factors such as wristbands or watches. The secure

chip provides three key elements:

 It can perform

processing functions.

 It is able to store confidential information very

securely.

 It can perform cryptographic processing.

These capabilities provide the

means for secure consumer payments.

In order to execute a payment, the chip must connect to a

chip reader in an acceptance terminal. There are two

possible means by which this physical connection may be

made which are often referred to as contact or contactless.

With contact, the chip must come into physical contact with the chip reader for

the payment transaction to occur. With contactless, the chip must come within

sufficient proximity of the reader, (a maximum of 4cm), for information to flow

Acceptance terminals include attended and unattended point of sale (POS), and automatic teller

machines (ATMs).

These figures were reported by EMVCo as of Q4 2013 and represent the latest statistics from

American Express, Discover, JCB, MasterCard, UnionPay and Visa as reported by their member

financial institutions globally.

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between the chip and the acceptance terminal. In both scenarios, the acceptance

terminal provides power to the chip to enable the chip to process.

Chips that are embedded in form factors such as plastic payment cards may

support only a contact interface, only a contactless interface, or both contact and

contactless. Chip cards that support both contact and

contactless interfaces are referred to as dual interface.

When the chip is installed inside a non-card form factor,

such as a mobile phone, contactless is typically the only

option for connection to the acceptance terminal.

2.2 Why EMV Chip Technology?

The EMV Chip Specifications are designed to significantly improve the security

for face-to-face payment transactions by providing features for reducing the

fraud that result from counterfeit and lost and stolen cards.

The features that are defined within the EMV Chip Specifications that enable this

are as follows:

1. Authentication of the chip card to verify that the card is genuine so as to

protect against counterfeit fraud for both online authorised and offline

transactions.

2. Risk management parameters to define the conditions under which the issuer

will permit the transaction to be conducted offline and the conditions that force

transactions online for authorisation, such as if offline limits have been exceeded.

3. Digitally signing payment data for transaction integrity.

4. More robust cardholder verification methods to protect against lost and stolen

card fraud.

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Counterfeit and lost and stolen fraud represents significant cost to all participants

in the payment process, including retailers, acquiring banks, card issuers and

cardholders. Costs are realised through the processing of cardholder disputes,

research into suspect transactions, replacement of cards that have been

counterfeited or reported as lost and stolen, and eventual liability for the

fraudulent payment itself. By reducing counterfeit and lost and stolen card fraud,

EMV chip technology offers real benefits to retailers, acquirers, card issuers and

cardholders.

Become involved in EMVCo

EMVCo can help deliver real benefits – for retailers, acquirers, card issuers and vendors

to the payments industry.

Why not have a say in the ongoing development of the EMV Specifications?

Become an EMVCo Technical or Business Associate. For more information refer to the

EMVCo website www.emvco.com.

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3 The History of the EMV Chip Specifications

3.1 Timeline

Figure 1: EMV Chip Specifications Timeline

3.1.1 The Need for a Global Chip Card Standard

Chip cards have been with us for approximately forty years but have evolved

considerably both in terms of functionality and security in that time. From the first

inventions and patents of the early 1970s through to the initial commercial

deployments in the 1980s, chip cards predate the delivery of the EMV Chip

Specifications by more than a decade.

The first mass deployment of chip cards for payment by the banking industry was

in France. Driven by a need to reduce high levels of fraud due to counterfeit and

lost and stolen magnetic stripe cards, the French banks conducted field trials of

microprocessor chip cards embedded in plastic bank cards in 1984.

By 1994, all French bank cards carried a chip using a French developed

specification for chip card credit and debit payment known as B0′. Through

issuing chip cards with PINs, the French banks were able to dramatically reduce

fraud due to counterfeit and lost and stolen cards.

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Following the French success, a number of European markets issued chip based

bank cards through the 1990s to counter the growing fraud due to counterfeit and

lost and stolen cards. However, all of these programs were based on domestic

market specifications that were not interoperable. This trend of establishing

proprietary domestic chip specifications in Europe through the early 1990s

created a situation where chip technology helped protect against fraud for

domestic transactions but magnetic stripe was the only method of acceptance

when the cardholder travelled outside their local market.

In the early 1990s, the United Kingdom and Japan were considering the

migration of their bank cards from magnetic stripe to chip. Both markets were

reluctant to continue the propagation of non-interoperable domestic chip

environments and so the driver for a global chip standard was born.

3.1.2 The Evolution of the EMV Chip Specifications

In 1994, three international payment systems, Europay, MasterCard and Visa

began the development of a global chip specification for payment systems. This

globalisation continued over the years, with JCB joining in 2004, American

Express in 2009, and both UnionPay and Discover in 2013.

An initial version of the specification titled EMV ’96 Integrated Circuit Card

Specification for Payment Systems, was released in 1996. The first production

version of the EMV Chip Specifications, version 3.1.1 was subsequently

published in 1998.

The most recent version of the EMV Chip Specifications is version 4.3, published

in 2011. Over the years since their initial publication the specifications have

evolved to meet the changing requirements of the payment industry, and

benefited from over a decade of implementation experience in multiple markets

across the globe.

Despite the ongoing change, a driving principle that stands behind the evolution

of the EMV Chip Specifications has been that each new release or version is

always backwards compatible with prior releases. This helps protect the

investment in the EMV chip infrastructure made by payment industry

stakeholders.

3.1.3 Common Core Definitions

The EMV Chip Specifications allow the issuer the flexibility to define their own

risk management processing that occurs in the chip card and the issuer host, and

the information content (known as Issuer Application Data) that flows between

the chip and issuer host. This has resulted in each payment system defining its

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own EMV chip payment application specification

which requires an issuer to

implement different card personalisation and host authorisation systems per

payment system.

In 2004, Common Core Definition (CCD) was introduced as part of the version 4.1

EMV specification. CCD defines a set of card application implementation options,

card application behaviours, and data element definitions sufficient to accomplish

an EMV transaction. Should an issuer wish to comply with CCD, it allows an

issuer to define a common EMV chip based payment application that may be

applied to all payment systems.

In 2005, EMVCo published a functional specification for an issuer payment

application, called EMV Integrated Circuit Card Specification for Payment

Systems Common Payment Application (CPA) that complies with the CCD

requirements, and defines card applications, implementation options and card

application behaviours. Issuers could choose to deploy CPA-compliant chip

cards as an alternative to cards supporting one of the international payment

systems’ individual applications.

3.1.4 Extending EMV Chip Technology to Contactless and Mobile

The evolution of contactless chip has transpired in quite a different way when

compared with the EMV Contact Chip Specifications. While the development of

contact chip occurred collaboratively amongst payment industry organisations

from the onset, contactless development has occurred in a competitive

environment, with the individual payment systems developing their own

specifications.

In 2007 the EMV Contactless Communication Protocol Specification (CCPS) was

published so that the hardware and firmware specifications (known as

contactless Level 1) would be common for all payment system contactless

payment applications.

This was followed in 2008 by the EMV Contactless Specifications for Payment

Systems – Entry Point Specification, which facilitated multiple payment system

contactless applications to reside in a single contactless terminal.

In addition to accepting EMV contactless chip cards, contactless terminals that

are compliant with the EMV Contactless Specifications can be designed to also

accept contactless chips embedded in other form factors such as mobile phones.

This is possible with the implementation of Near Field Communications (NFC)

support in the mobile phone or equivalent device.

International payment system EMV based card specifications include American Express AEIPS,

Discover DPAS, JCB J/Smart, MasterCard M/Chip, UnionPay IC Card and Visa VIS.

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3.2 EMV Chip around the World

From the earliest field trials in 1997, to the progression of national migrations

from magnetic stripe to EMV chip in various markets around the world, the EMV

Chip Specifications are a global standard for chip payment, and they continue to

grow in usage.

Today there are over two billion active EMV chip cards in circulation and over 35

million EMV acceptance terminals deployed around the world

. But, of course the

real value proposition is the extent to which EMV transactions actually occur.

Accordingly, in 2014 EMVCo transitioned to reporting EMV chip transaction

percentages by region. The following diagram provides an overview of the

percentage of card-present transactions that are EMV by major region.

These figures were reported by EMVCo as of Q4 2013 and represent the latest statistics from American

Express, Discover, JCB, MasterCard, UnionPay and Visa as reported by their member financial institutions

globally.

Protect your investment in EMV infrastructure.

The EMV Chip Specifications continue to develop to meet the changing needs of the

payment industry.

Make sure you can provide input into the future development of the EMV Chip

Specifications. Become an EMVCo Technical or Business Associate. For more

information refer to the EMVCo website www.emvco.com.

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Figure 2: Percentage of Card-Present Transactions that are EMV

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4 EMVCo LLC

In February 1999, Europay, MasterCard and Visa

created the limited liability company, EMVCo, as a

separate entity to manage, maintain, and enhance

the EMV Chip Specifications.

In 2002, Europay was acquired by MasterCard.

In 2004, JCB joined with MasterCard and Visa as

co-owners of EMVCo, and in 2009, American Express joined as the fourth

owning entity. In 2013 both UnionPay and Discover became joint owners, giving

each payment brand an equal 1/6th ownership of EMVCo, LLC.

4.1 EMVCo Mission

The primary goal of EMVCo was initially to facilitate the interoperability of chip-

based transactions. This was achieved through two primary activities:

1. The management, maintenance and ongoing enhancement of the EMV

Chip Specifications.

2. Managing testing and approval procedures for all EMV chip capable

terminals and certain aspects of EMV chip cards to assess compliance

with the EMV Chip Specifications.

In December 2013 the mission statement of EMVCo was revised to reflect its

changing scope following the decision to develop specifications beyond those

solely for chip based transactions. The original primary goals detailed above are

reflected in the following, updated Mission Statement:

“To facilitate worldwide interoperability and acceptance of secure payment

transactions by managing and evolving the EMV Specifications and related

testing processes.”

EMVCo Mission Statement December 2013

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4.2 Structure of EMVCo Management and Operations

The structure of EMVCo’s management and operations, and interactions with

third party advisors is illustrated in the following diagram.

Figure 3: EMVCo Interaction Structure

American Express, Discover, JCB, MasterCard, UnionPay and Visa have

appointed individuals to work at both management and Working Group levels

within the EMVCo organisation. The Board of Managers, under guidance and

direction of the Executive Committee, governs EMVCo. The Executive

Committee, in turn, receives input from the EMVCo Advisors on business and

strategic issues. The organisation has established several Working Groups,

composed of representatives from its members, to carry out the work of EMVCo.

The Board assigns work items, functions and responsibilities to the Working

Groups as appropriate.

EMVCo maintains the EMVCo Associates Programme, in which third parties can

provide input to EMVCo and participate in certain EMVCo activities as a

Business Associate or Technical Associate. Business Associates provide

EMVCo with input on strategic business and implementation matters related to

the use of the EMV Specifications. Each Business Associate may appoint an

individual to serve on the Board of Advisors and, accordingly, advise the EMVCo

Executive Committee.

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Payment industry stakeholders may participate as a Technical Associate and

provide EMVCo with input and receive feedback on detailed technical and

operational considerations connected to the EMV Specifications and related

processes. Technical Associates are able to engage with all of the EMVCo

Working Groups and receive updates or provide input on the Working Group

activities and specifications. Seats on the EMVCo Board of Advisors are

reserved for Technical Associates representing distinct market sectors. Technical

Associate representation on the Board of Advisors is determined through an

annual election process.

Organisations that currently participate in EMVCo as Business Associates or

Technical Associates are listed on the EMVCo website.

EMVCo also maintains the EMVCo Subscriber Service, which anyone can join as

a Subscriber to receive advance notice of pending developments and changes,

submit queries to EMVCo, and participate in a more regular dialogue with

EMVCo. Organisations that may benefit from being Subscribers are participants

in the global payment industry, including vendors, consultants, laboratories,

payment systems, retailers and regional associations.

EMVCo hosts an annual User meeting for Associates and Subscribers.

Eligibility, fee structures, and application details relating to participation in

the Associates Programme and Subscriber Service can be found on the

EMVCo website, www.emvco.com.

4.3 The Role of the Payment Systems in Contrast to EMVCo

EMVCo is the global technical body that facilitates the worldwide interoperability

and acceptance of secure payment transactions by managing and evolving the

EMV Chip Specifications and related testing processes. EMVCo does not define

or issue products, and it has no mandate to enforce EMV compliance within the

marketplace.

EMVCo operates separately from the international Payment Systems that own

EMVCo, with its own separate approval and decision making processes. The

Payment Systems assume the role of defining and issuing products, and

enforcing EMV compliance for products that carry their respective brands.

Additionally, the individual payment systems publish their own EMV chip

payment application specifications for their own respective branded chip card

products; these define the options for card risk management processing and

other features not defined by EMVCo. Also, the Payment Systems maintain the

responsibility for the functional testing and type approval for cards that are

compliant with their own product specifications.

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The individual payment systems have to personalise the EMVCo kernel to

ensure product acceptance matches global and regional rules.

4.4 EMVCo Relationship with Other Standards Bodies

The EMV Chip Specifications cannot be considered in isolation, and to this end,

EMVCo collaborates with other industry bodies and standards organisations.

Examples of this collaboration are given below.

1. International Organisation for Standardisation (ISO) - The EMV Chip

Specifications are based on underlying International Organisation for

Standardisation (ISO) standards as follows:

 ISO/IEC 7816: Identification Cards – Integrated Circuit(s) Cards

 ISO/IEC 14443: Identification Cards – Contactless Integrated Circuit(s)

Cards – Proximity Cards

2. Payment Card Industry Security Standards Council (PCI SSC) is

primarily concerned with the protection of sensitive payment information

such as account information and personal identification numbers (PINs).

The EMV Chip Specifications and PCI standards are complementary in

enhancing payment security and reducing fraud due to counterfeit and lost

and stolen cards.

3. The Near Field Communication (NFC) Forum – EMVCo has been

working to extend EMV technology to the contactless and mobile

channels. This has required alignment with the NFC Forum which is

responsible for developing the specifications for communication between

NFC devices and services

4. GlobalPlatform - Part of EMVCo’s activities is to review the functionality

and security of platforms on which an EMV chip payment application will

reside. Alignment with standards bodies such as GlobalPlatform are

important as EMV chip payment applications are increasingly

implemented on shared chip platforms that support multiple applications,

each from a different application owner.

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5 EMV Chip Technology – How it Works

5.1 Stepping Through an EMV Chip Transaction

There is a fundamental difference between a magnetic stripe and an EMV chip

transaction. For a magnetic stripe transaction, the card is simply a data store that

is read by the terminal and then the card is no longer used. The terminal

performs all the processing in conjunction with the issuer and / or payment

system and applies the rules for the transaction.

During an EMV transaction, the chip is capable of processing information and

determines many of the rules that determine the outcome of the transaction. The

terminal helps enforce the rules set by the issuer on the chip. These rules can

include enforcing services such as offline data authentication, verifying the

cardholder identity via PIN or signature, online authorisation and so on. It is up to

the issuing bank to define which of these services is required for the current

transaction, via the rules placed on the chip. If the terminal is unable to provide

the services requested by the chip, the issuer can set rules that will result in the

chip declining the transaction.

Accordingly an EMV chip transaction requires interaction between the chip and

the terminal which is a protocol that is defined by the EMV Chip Specifications.

The protocol defines a series of steps, which are described in the following

sections.

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5.1.1 Steps for an EMV Contact Transaction

Figure 4: Processing Steps for an EMV Contact Chip Transaction

5.1.2 Steps for an EMV Contactless Chip Transaction

The major difference between an EMV contactless chip transaction and an EMV

contact chip transaction is that the transmission of information between the chip

and the terminal is faster for contactless and some of the transaction steps may

be performed after the chip has left the proximity of the reader (i.e., online

authorisation). The goal is to minimise the amount of time that the chip must be

held within proximity of the reader.

Application Selection

Initiate Application

Processing

and Read Application Data

Offline Data Authentication

Processing Restrictions

Cardholder Verification

Terminal Risk Management

There may be more than one EMV

application in the chip. The terminal

and chip “agree” on common

supported applications and choose

which to use for the transaction. This

may involve the cardholder choosing

the application where there is more

than one mutually supported

application.

The selected application is

initiated and the terminal

reads necessary data from

the chip.

Offline Data Authentication

via SDA, DDA or CDA.

Checks are performed to

confirm the chip is allowed

to do the transaction

requested.

Cardholder is verified via a method

supported by the terminal and agreed

by the chip. Methods can include

signature, online PIN, offline

enciphered PIN, offline plaintext PIN,

or “no CVM”.

The terminal performs several

checks such as floor limit to

determine whether there is a

requirement for online

processing. Terminal Action Analysis

Card Action Analysis

Online Processing

Completion and script processing

Based on results of offline data

authentication, processing restrictions,

cardholder verification, terminal risk

management and rules in the terminal and

from the chip, the terminal application

requests a result of decline offline,

approve offline or go online.

Based on issuer defined

rules and limits, the chip

will respond with

- ARQC :go online;

- AAC: offline decline

- TC: offline approval

Transaction completes.

If online processing occurred

the chip will be requested to

confirm with a TC (approval) or

an AAC (decline) and will apply

any script commands from the

issuer host.

If the chip requests to go online,

then the terminal builds an

online request to the issuer host

for authorisation and online card

authentication. If the response

includes optional issuer

authentication (ARPC), the

terminal will send the data to

the chip for verification.

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5.2 EMV Chip Features

The specific features defined by EMVCo that achieve the protections and

controls to reduce counterfeit and lost and stolen card fraud are described in the

following sections.

5.2.1 Application Cryptogram

During an EMV chip transaction, an application cryptogram is generated using

two- key triple DES cryptography. This is a signature generated from critical data

elements contained in either the online authorisation request to the card issuer (if

online authorisation is required), or the final financial transaction required for

clearing and settlement.

Figure 5: Application Cryptograms

The cryptogram that is generated for the online authorisation request is termed

the Authorisation Request Cryptogram (ARQC) and the cryptogram that is

generated by signing data elements when a chip approves the payment for

clearing and settlement is known as the Transaction Certificate (TC). If the

transaction is declined, the chip will generate a cryptogram known as an

Application Authentication Cryptogram (AAC).

The purpose of these application cryptograms is twofold:

1. Online card and issuer authentication

The chip generates an ARQC which is sent in the authorisation request when an

EMV chip payment transaction proceeds online to the issuer host. The ARQC

can be verified by the issuer host and this confirms that the chip is not

counterfeit.

As part of the authorisation process, the issuer host may generate a return

cryptogram known as the Authorisation Response Cryptogram (ARPC) which is

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sent back to the chip in the authorisation response. The verification of the ARPC

allows the chip to confirm that the approval was received from the actual issuer

host, and therefore that any counters or offline limits on the chip may be reset.

2. Signing transaction data elements for transaction authentication and

integrity

The following cryptograms are generated by signing critical data elements in the

respective transaction messages. Validation of the cryptograms by the recipient

helps to confirm the data elements are not altered.

o ARQC – online authorisation request;

o ARPC – online authorisation response;

o TC – financial message for clearing and settlement for an approved

transaction;

o AAC – declined transaction.

5.2.2 Risk Management and Authorisation Controls

EMV chip transactions provide the issuing bank with controls at the point of sale

which helps enable the issuer to reduce exposure to fraud and credit risk for

offline and below floor limit transactions. The issuing bank can set limits in the

chip card that restrict the number of consecutive offline transactions that may be

processed.

Figure 6: Risk Management and Script Commands

Additionally, EMV defines script commands that can be returned to the card in an

online authorisation response that allows the issuer to change the card limits,

perhaps even reducing them to zero depending upon assessed risk profiles.

Issuers may also issue scripts to block or disable a lost or stolen card.

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Under acquirer control, the EMV Chip Specifications provide a means for

acceptance terminals to select transactions for online approval, based not only

on floor limit, but also domestic or retailer criteria, as well as employing a random

selection of below the floor limit transactions to be sent online.

Together, these measures provide protection against the use of lost and stolen or

fraudulent cards which attempt to stay beneath the floor limit and provide the

issuers with a means of permanently blocking a stolen card.

5.2.3 Cardholder Verification Processing

As well as continuing to support all the cardholder verification methods available

for magnetic stripe, the EMV Chip Specifications define two new features which

provide issuers with greater flexibility in determining and enforcing methods for

verifying the cardholder is the actual owner of the card during a payment. These

features can help reduce fraud due to lost and stolen cards.

Figure 7: Cardholder Verification Processing

The first feature is the Cardholder Verification Method (CVM) List which is

defined by the issuer in the chip card. The CVM list allows the issuer to specify in

order of priority, the cardholder verification methods to be applied for particular

acceptance conditions, allowing a CVM to be applied when supported by the

terminal, but providing an alternative when the preferred CVM is not supported.

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For example, this allows an issuer to require the cardholder to use PIN in

acceptance terminals that support PIN (perhaps domestically), but allow the

cardholder to sign when travelling to markets that do not support PIN.

The second feature is a new CVM of offline PIN. While the use of offline PIN is

entirely optional, it is possible to use an EMV chip card to verify a PIN entered

into the terminal PIN pad by the cardholder and therefore provide a PIN based

cardholder verification method available for all offline and online transaction

acceptance environments, including below the floor limit and offline only.

There are two flavours of offline PIN defined in the EMV Chip Specifications:

enciphered offline PIN where public key cryptography is used to protect the PIN

as it is sent from the acceptance terminal to the card for verification and plaintext

offline PIN where the PIN is sent in the clear from the acceptance terminal to the

card for verification.

5.2.4 Offline Data Authentication

The EMV Chip Specifications describe a feature known as offline data

authentication to combat counterfeit fraud for card payments that are performed

at offline card acceptance terminals. Offline data authentication uses public key

cryptography to perform payment data authentication without the need to go

online to the issuer host.

Figure 8: Offline Data Authentication

There are essentially two flavours of off-line data authentication - Static Data

Authentication (SDA), and Dynamic Data Authentication (DDA). Combined Data

Authentication (CDA) is a variation on DDA.

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During a payment transaction, the chip card and the terminal agree to perform

SDA, DDA or CDA. Only one method of offline data authentication is performed

for a particular transaction. When offline data authentication is not performed, an

EMV chip transaction must go online for authorisation.

The essential difference between SDA and DDA is that while SDA indicates that

the data read from the chip has not been manipulated or changed since it was

issued, SDA does not necessarily mean that the card is genuine. It is possible to

copy the chip card data, including the SDA cryptogram, and write it to another

chip card to create a counterfeit card that could successfully pass offline SDA at

the point of sale. It should be noted that any counterfeit card could be detected

during online processing.

DDA indicates that the chip card, and the information on the card, has not been

altered since being issued to the cardholder, and that the card is not a copy of

the original chip card issued by performing offline dynamic authentication using

data from the terminal sent uniquely for each transaction. DDA is therefore a

stronger form of offline data authentication than SDA because DDA indicates that

the card has been authenticated offline using unique transaction specific data.

CDA, as a variation of DDA, is designed to combat a sophisticated method of

attack at the point of sale in which the attacker attempts to use a valid chip card

to pass offline data authentication, but from then on during the payment,

simulates card actions in order to obtain authorisation.

Card issuers will choose an offline data authentication method based on factors

such as cost per card and speed of transaction. These costs are weighed against

the risk of fraudsters attacking chip cards using the less robust authentication

methods such as SDA, while the much easier target represented by magnetic

stripe cards is still prevalent. Individual payment systems may mandate the use

of specific offline data authentication methods in particular regions.

EMVCo is constantly monitoring the strength of cryptography and on a regular

basis issues key length recommendations published in EMVCo Notice Bulletins.

If an issuer chooses to issue a chip card that only permits transactions that are

authorised online to the issuer host, it is possible that the chip would not require

offline data authentication support at all as determined by individual payment

systems.

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6 Testing and Approval

6.1 EMVCo Objective

In addition to maintaining and evolving the EMV Chip Specifications, the other

key and complementary EMVCo role is to assess the compliance of vendor

products developed to these specifications, and approve products that pass

testing prior to deployment in the field.

There are numerous activities that are performed by EMVCo in support of this

objective which include defining and implementing test plans based on the EMV

Chip Specifications and defining and implementing a process for the qualification

of test tools to implement EMVCo test cases.

The actual testing is performed by EMVCo accredited external test laboratories

located in numerous locations around the world. This is facilitated through an

EMVCo managed laboratory accreditation program with an associated ongoing

monitoring process.

The payment systems specify the rules regarding how long approved products

may be used in the field.

The components that comprise the EMV approval process are described in the

following sections.

6.1.1 Terminal Type Approval

Terminal type approval is defined and administered by the EMVCo Terminal

Approval Working Group (TAWG) and is designed to assess whether EMV chip

enabled acceptance terminals sufficiently conforms to the functional

requirements defined in the EMV Chip Specifications. There are two separate

and independent processes involved.

EMV Level 1 terminal type approval is designed to verify whether the terminal

chip reader demonstrates sufficient conformance to Level 1 of the EMV

mechanical and electrical protocol specifications which covers the transfer of

data between the terminal and the card.

EMV Level 2 terminal type approval is designed to verify whether the software

residing in the acceptance terminal that performs the EMV processing, referred

to as the EMV Level 2 kernel, demonstrates sufficient conformance to the EMV

Chip Specifications. EMVCo defines the kernel as the terminal application

software that supports the EMV payment application functions as defined in the

EMV Chip Specifications. The non-EMV application functionality that supports

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functions like the printer and display, and building messages to send to the

acquirer, is not considered part of the kernel.

The TAWG monitors the ongoing operation of the terminal type approval process

and the application of test tools and tool updates. This allows the required

improvements to be identified and the process to be improved as required.

Additionally, the TAWG manages a contractual process for terminal vendors

seeking approval of their products. Vendors are issued a Letter of Approval for

each product that successfully passes type approval.

6.1.2 Card Type Approval

Card type approval is defined and administered by the EMVCo Card Approval

Working Group (CAWG) and is designed to assess whether the chip hardware

and embedded EMV functionality sufficiently conforms to the electro-mechanical

and functional requirements defined in the EMV Chip Specifications.

It is important to note that EMVCo does not manage the type approval process

for chip cards that comply with international payment system card specifications.

The payment systems directly manage card type approval processes for cards

that comply with their respective EMV-based card specifications.

However, EMVCo does manage the type approval process for chip-resident

payment applications that are designed to be compliant with the EMV Common

Core Definition (CCD) and Common Payment Application (CPA).

6.1.3 Chip Security Evaluation

The EMVCo chip security evaluation is designed to assess whether a chip

demonstrates sufficient assurance of certain minimum levels of security required

for EMV chip payment, including security mechanisms and protections designed

to withstand known attacks. The results of the EMVCo chip security evaluation

are then used by each payment system in their card approval process.

Card functional security evaluation is out of scope for EMVCo and is run by the

payment systems.

International payment system EMV-based card specifications include American Express AEIPS,

Discover DPAS, JCB J/Smart, MasterCard M/Chip, UnionPay IC Card and Visa VIS.

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7 Implementation Considerations

The migration from magnetic stripe to EMV chip requires investment in changing

the payment infrastructure and associated processes. Changes are required from

the acceptance terminals installed at retailers, through acquirer switches and

networks, right up to issuer authorisation hosts and card production systems.

It is important to note that the implementation of chip infrastructure is not an

EMVCo role. It falls to the international and domestic payment systems, card

issuers and card acceptors.

7.1 Issuer Considerations

An issuer migrating to EMV chip card issuance needs to consider at least three

main areas of implementation activity as illustrated in the following diagram.

Figure 9: Issuer EMV Implementation Activities

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These implementation activities are described in more detail in the following

table.

Activity

Description

Upgrade card production and

personalisation processes and

infrastructure for chip.

Choosing a chip card platform with the necessary

hardware that meets the requirements for issuing

chip cards. These requirements may include single

application, or multi-application, payment only, or

payment plus other applications, contact only, or

dual interface, and support for the required

cryptographic processing.

Determine the parameters and rules that must be

personalised into the chip payment application that

will meet the card issuer’s requirements for

reducing counterfeit and lost and stolen card fraud.

Generate the EMV cryptographic keys required to

support the card issuer’s application features for

reducing counterfeit and lost and stolen card fraud.

Upgrade existing card production systems from the

existing magnetic stripe delivery processes to

enable the production and delivery of EMV chip

cards.

Upgrade authorisation and settlement

systems for chip.

Authorisation and clearing and settlement

messages resulting from chip card transactions at

the point of sale will carry new chip information.

Changes are required to issuer systems to issue,

manage, and authorise and settle transactions for

EMV chip cards and to support the necessary

operational processes that can take advantage of

the enhanced chip data such as customer service,

chargebacks and disputes, fraud, credit risk

management, and management reporting.

Re-engineer internal processes in support

for chip.

Update issuer customer service and back office

operations. This includes updating processes to

enable customer service representatives to support

cardholders with EMV chip cards. Tools need to be

provided to customer service representatives to

enable them to have the necessary information to

handle queries from cardholders with EMV chip

cards. Systems and processes need to be

enhanced to support chip cards back office

operations such as chargebacks and disputes,

fraud investigation and credit risk management

Table 10: Issuer Implementation Considerations

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7.2 Retailer and Acquirer Considerations

An acquirer or retailer migrating to EMV chip card acceptance needs to consider

at least three main areas of implementation activity as illustrated in the following

diagram.

Figure 11: EMV Acceptor Implementation Activities

These implementation activities are described in more detail in the following

table.

Activity

Description

Deploy EMV chip acceptance terminals,

and retrain terminal operators and upgrade

retailer support services

Procure approved EMV acceptance terminals. This

means talking to vendors to agree on the EMV

parameters to be installed in the terminals to meet

retailer and acquirer requirements for accepting

chip cards and ensuring the terminals are EMV

Level 1 and Level 2 type approved.

Ensure that existing terminal applications are

integrated with the new EMV functionality provided

by the EMV Level 2 application kernel.

Upgrade terminal management systems so that

EMV configurations and parameters may be

managed efficiently and remotely.

Deploy terminals in the field. This involves

upgrading or replacing hardware to incorporate

chip readers and upgrading software to include the

EMVCo approved EMV chip functionality.

Train terminal operators and cashiers to accept a

chip card – to insert the chip card instead of

swiping the magnetic stripe. Additionally, retailer

field training staff, and retailer support staff need to

be up-skilled to perform their tasks for chip

implementation and support.

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Upgrade host systems to switch chip

transactions for authorisation and

settlement.

Upgrade terminal to acquirer host interface. This

means the message format for the interface

between the terminal and the retailer and/or

acquirer host will need to be upgraded to carry new

EMV chip data elements.

Upgrade host and interchange interfaces. This

means the retailer and/or acquirer host will need to

be upgraded to switch messages containing new

EMV chip data elements from the terminals to

outgoing interchange links to the card issuers. This

will require mapping data elements from incoming

messages on the terminal links to outgoing

messages on the interchange links.

Re-engineer internal processes in support

for chip.

Update back office operations and retailer service

to take advantage of enhanced chip information

available in the transaction messages from

terminals. This includes upgrading procedures and

staff operations to support the following functions.

- Chargeback and transaction dispute

procedures

- Retailer service

- Fraud Detection

Table 12: Acquirer Implementation Considerations

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8 The Next Generation of EMV Chip Specifications

Many changes have occurred in the payments industry since the initial

publication of the EMV Chip Specifications. Specifically, EMVCo has recognised

the following:

• Continuous expansion of business requirements and payment

technologies (e.g. mobile).

• Convergence of contact and contactless solutions needs to be simplified

across the entire payments ecosystem.

• Evolution of public key cryptography (e.g. Elliptic Curve Cryptography).

• Increased requirement to transport additional ‘value add’ data across the

networks.

These developments have impelled EMVCo to review the EMV Chip

Specifications through a strategic lens and evaluate a roadmap for the future of

payments. It formed the Next Generation Task Force which is tasked with

designing the solution and leading the development of the next generation of

EMV Chip Specifications.

8.1 Business Drivers

There are many reasons why EMVCo’s work in the development of the next

generation of EMV Chip Specifications is important. Some of the key business

drivers include:

 Product Time to Market – Enable a more cost and time efficient

deployment of current, future payments

 Terminal evolution - Reduce impact on terminal infrastructure as product

requirements evolve

 POS Throughput – Provide options for improving throughput at the point-

of-sale

 Transaction Quality – Improve transaction data quality and relevance

 Transaction and Business Environments – Address different types of

transactions and various business environments

 Product Selection – Improve the product selection for the cardholder and

merchant

 Security – Future-proof EMV security including incorporating ECC and

mitigate privacy-related issues

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8.2 EMV Next Generation Specifications

The EMV Next Generation (Next Gen) Specifications establishes a common,

robust technology platform to support a variety of interfaces—contact,

contactless, mobile, etc.—for both online and offline processing, by:

 Enhancing transaction information available to acquirers, networks, and

issuers

 Optimising transaction flows to improve throughput at the point of sale and

the cardholder experience

 Future proofing EMV chip security by incorporating next generation public

key infrastructure and a secure channel between the card and acceptance

device

 Supporting multiple communication protocols, with the flexibility to add

additional protocols in the future

 Integrating Type Approval processes for contact and contactless

Special attention is given to migration and global interoperability between existing

legacy EMV chip products and EMV Next Gen products. It is expected that cards

and acceptance devices based on legacy EMV Chip Specifications might remain

in the field until 2030.

The coexistence of legacy EMV chip and Next Gen applications (on the card’s

side) and legacy EMV chip and Next Gen Kernels (on the acceptance device

side) facilitates the introduction of new features in response to individual market

needs, while providing a natural migration path. Individual payment systems and

markets will determine when Next Gen products become relevant for their needs,

and may begin migrations well before 2030.

To minimize deployment costs and disruption in the field and to avoid multiple

overlapping migrations—especially those that would require changes to

acceptance devices and Type Approval testing—EMV Next Gen leverages

recent evolutions in smart card, acceptance device, and network technology;

incorporating into the Next Generation Kernel System Specifications all the

enhancements foreseen to keep EMV chip technology relevant for the next 20+

years. EMV Next Gen is designed so that the overall payment functionality and

the cardholder experience should not be impacted by whether Next Gen or

legacy EMV chip functionality is used for a particular transaction.

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8.3 Milestones

EMVCo continues to progress EMV Next Gen by achieving the following

milestones:

2011

Start the EMV Next Generation effort

2012

EMVCo Next Generation scope finalisation

2013

EMV Next Generation high-level architecture completed

2014

EMV Next Generation proof of concept

2015

EMV Next Generation Draft Specification projected

2016

EMV Next Generation Specification projected

2017

Terminal Type Approval Process availability projected

2025

Payment systems may sunset the issuance of legacy contact/contactless

cards

2030

Payment systems may remove legacy cryptography (i.e. keys) from

terminals

*The timeline and milestones presented are provisional and subject to change

Help shape the future of EMV Technology

EMV is continuing to evolve into new channels such as mobile as well as developing the Next

Generation of the EMV Chip Specifications

Will your business provide input into these new and exciting developments? Become an

EMVCo Associate. For more information please refer to the EMVCo website

www.emvco.com.

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9 Glossary

Term

Description

Acquirer

A financial institution that enters into an agreement with

retailers to facilitate acceptance of payment cards and then

settles the transaction with the card issuer directly or via a

payment scheme.

AEIPS

American Express ICC Payment Specification (Terminal and

chip card)

Application Authentication

Cryptogram (AAC)

A cryptogram generated by the card at the end of offline and

online declined transactions to indicate that the card

declined the transaction.

Application Cryptogram

A cryptogram generated by the card in response to a

GENERATE AC command.

Authentication Request

Cryptogram (ARQC)

A cryptogram generated by the card at the end of the first

round of card action analysis which is included in the

authorization request sent to the card issuer and which

allows the issuer to verify the validity of the card and

message.

Authentication Response

Cryptogram (ARPC)

A cryptogram generated by the issuer and sent in the

authorization response that is sent back to the acquirer. The

acquirer and terminal provide this cryptogram back to the

card which allows the card to verify the validity of the issuer

response.

Automated Teller Machine

(ATM)

An unattended terminal that has online capability, accepts

PINs, and disburses currency.

Cardholder Verification Method

(CVM)

The method to be used to verify the cardholder’s identity.

This may include signature, PIN or no CVM required.

Certificate Authority (CA)

Trusted third party that establishes a proof that links a public

key and other relevant information to its owner.

Combined DDA/Application

Cryptogram Generation (CDA)

A type of offline data authentication where the card

combines generation of a cryptographic value (dynamic

signature) for validation by the terminal with generation of

the Application Cryptogram to verify that it came from a valid

card.

Common Core Definition (CCD)

A definition of card application implementation options, card

application behaviours, and data element definitions

sufficient to accomplish an EMV transaction.

Common Payment Application

(CPA)

A functional specification for an issuer payment application

that complies with the CCD requirements, and defines card

applications, implementation options and card application

behaviours.

Contactless transaction

A chip transaction where the communication between the

card and the terminal does not take place over a contact

interface.

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Term

Description

Cryptogram

Result of a cryptographic operation which transforms data

either to hide the data, or to produce a digital signature that

may be used to verify the origin and integrity of the data.

Cryptographic Key

The numeric value entered into a cryptographic algorithm

that allows the algorithm to encrypt or decrypt a message.

CVM List

An issuer-defined list in the chip card’s payment application

profile indicating the hierarchy of preferences for verifying a

cardholder's identity.

Data Encryption Standard

(DES)

The public domain symmetric key cryptography algorithm of

the National Institute for Standards and Technology.

Dynamic Data Authentication

(DDA)

A method of offline data authentication used to verify that

issuer-selected card data elements and transaction-specific

dynamic data elements have not been fraudulently altered

and that they come from a valid card.

DPAS

D Payment Application Specification – The Discover and

Diners Club International EMV-based ICC Specifications.

Elliptic Curve Cryptography

(ECC)

A public key cryptosystem which requires smaller keys and

is significantly faster to process than RSA. It is used for data

encryption and authentication.

EMVCo

EMVCo LLC, a company that manages, maintains, and

enhances the EMV Chip Specifications jointly owned by the

Payment Systems.

Floor Limit

A currency amount below which an online authorization is

not required for a single transaction unless a service code is

present which requires online authorization.

International Organization of

Standardization (ISO)

The international agency that establishes and publishes

international technical standards.

Issuer

A financial institution that issues cards and whose name

appears on the card as the issuer (or, for cards that do not

identify the issuer, the financial institution that enters into the

contractual relationship with the cardholder).

Issuer Application Data

Payment system defined application data for transmission

from the chip card to the issuer in an online transaction.

J/Smart

JCB EMV-based ICC Specifications

Kernel

A piece of terminal application software that supports the

EMV payment application functions as defined in the EMV

Specifications. The non-EMV functionality that supports

functions like the printer and display, and building messages

to send to the acquirer, is not considered part of the kernel.

M/Chip

MasterCard EMV-based ICC Specifications

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Term

Description

Near Field Communication

(NFC)

A short-range high frequency wireless communication

technology which enables the exchange of data between

devices over about a 10 centimeter distance. The

technology is a simple extension of the ISO/IEC 14443

proximity-card standard (proximity card, RFID) that

combines the interface of a smartcard and a reader into a

single device.

Offline Data Authentication

A process whereby the card is validated at the point of

transaction, using RSA public key technology to protect

against counterfeit or skimming. Three forms of offline data

authentication are defined by EMV: SDA, DDA and CDA.

Offline Enciphered PIN

A cardholder verification method defined in EMV in which

the cardholder PIN is entered at a terminal, encrypted with

an ICC public key, and sent to the ICC where it is decrypted

and then validated.

Offline only terminal

A chip terminal that is not capable of sending an online

authorization request and where all transactions have to be

approved offline.

Offline PIN

A cardholder verification method where the card verifies a

PIN that is entered by the cardholder; the PIN is stored in

the card.

Offline Plaintext PIN

A cardholder verification method defined by EMV in which

the cardholder PIN is entered at a terminal and sent to the

ICC in plaintext to be validated.

Online capable terminal

A chip terminal that supports both offline and online

processing.

Online PIN

A cardholder verification method where the PIN is sent

securely from the terminal to the card issuer, or the card

issuer’s designated agent, to be verified.

Payment Card Industry (PCI)

A consortium of the major payment schemes, Visa,

MasterCard, American Express, JCB and Discover, which

became formalized as the PCI Security Standards Council

or PCI-SSC and which manages various aspects related to

common industry security requirements.

Personal Identification Number

(PIN)

A personal identification code that is known only to the

cardholder and is entered into the terminal and sent to an

authorizing entity for verification. The entity may be either

the card issuer, or designated agent, or an ICC.

PIN Entry Device (PED)

A secure device that allows cardholders to enter a PIN.

Point of Sale (POS)

An attended or unattended terminal for the acceptance of

payment cards for cash, goods and services.

Private Key

The secret component of an asymmetric key pair. The

private key is always kept secret by its owner. It may be

used to digitally sign messages for authentication purposes.

Public Key

The public component of an asymmetric key pair. The public

key is usually publicly exposed and available to users. A

certificate to prove its origin often accompanies it.

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Term

Description

Public Key Certificate

An asymmetric transformation of the public key by a

Certificate Authority and intended to prove to the public key

recipient the origin and integrity of the public key.

Public Key Pair

The two mathematically related keys, a public key and a

private key, which, when used with the appropriate public

key algorithm, can allow the secure exchange of information

and message authentication, without the secure exchange

of a secret.

RSA

A public key cryptosystem developed by Rivest, Shamir, and

Adleman. It is used for data encryption and authentication.

Skimming

The act of using a device to illegally collect data from the

magnetic stripe or chip of a credit, debit or ATM card. This

information, copied onto another blank card's magnetic

stripe or chip, is then used to make purchases or withdraw

cash in the name of the actual account holder.

Static Data Authentication

(SDA)

A type of offline data authentication where the terminal

validates a cryptographic value placed on the card during

personalization. Protects against some types of counterfeit

fraud but does not protect against skimming.

Symmetric Algorithm

An algorithm in which the key used for encryption is identical

to the key used for decryption. DES is the best known

symmetric encryption algorithm.

Terminal Risk Management

(TRM)

Offline checks performed by the terminal to determine

whether a transaction should proceed further. It includes

floor limit checking and exception file checking.

Transaction Certificate (TC)

Cryptogram generated by the card at the end of either an

online or offline approved transaction and can be used by

the retailer or acquirer as proof that the card approved the

transaction.

Triple Data Encryption Standard

(TDES)

The data encryption standard used with a double-length

DES key. Sometimes referred to as TDEA or DES3.

VIS

Visa EMV-based ICC Specification

A Guide To EMV Chip Technology V2.0 20141120122132753

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