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Attacks/Breaches

10/31/2014
04:11 PM
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Study: Chip-&-PIN Won't Cure Retail Breaches

Online card payment transactions on the rise, according to Javelin Strategy & Research.

The good news: US merchants are moving away from magnetic stripe payment cards to inherently more secure chip-and-pin or EMV type cards. The bad news: Most smaller merchants won't be ready for the rollout, and online payment card fraud (remember that?) is rising and will continue to increase, according to a new report by Javelin Strategy & Research.

"PoS fraud is going to decline, but it's going to take a while. EMV is not going to be deployed overnight," says Al Pascual, director of fraud & security at Javelin Strategy & Research.

Javelin studied Europe's EMV evolution, and while it's helped with on-premises card fraud, card-not-present (CNP) or online payment card transaction fraud has grown. "We're seeing CNP [fraud] is already bad, and it's going to get a lot worse."

That's because the total volume of card-not-present transactions are rising, and the bad guys will go after the easier targets as PoS systems get better locked down, according to Javelin's report.

"As the transaction volume in ecommerce grows, the total amount of CNP fraud will grow along with it," Pascual says.

He says the volume of CNP fraud in the UK -- where EMV cards are used at the brick-and-mortar PoS -- was growing. "In the US, without EMV, the numbers were very similar," he says.

Meanwhile, Javelin says retailers with less than 20 employees won't be ready for the migration to EMV payment systems, so they'll continue to use more vulnerable magnetic stripe technology. Bottom line: They will be the juicy PoS targets for cyber criminals. "In a November 2013 survey of small and micro merchants, just 20% stated that they would be EMV-capable within the next 12 months and 50% stated that they had little to no knowledge of the EMV liability shift. This gap in retailer awareness and motivation will contribute to the delay in EMV POS terminal conversion," the report says.

Says Pascual: "[Consumers] should get used to the idea that CNP merchants and e-commerce are going to become … breach victims. [Attackers] have to get that card data from somewhere," he says. "It's not going to be Target that gets breached. It's going to be Target.com."

Kelly Jackson Higgins is the Executive Editor of Dark Reading. She is an award-winning veteran technology and business journalist with more than two decades of experience in reporting and editing for various publications, including Network Computing, Secure Enterprise ... View Full Bio

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Kelly Jackson Higgins
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Kelly Jackson Higgins,
User Rank: Strategist
11/1/2014 | 7:55:51 PM
Re: A partial solution
I think consumers often miss or are in denial that they ultimately do pay for a data breach with higher prices at the victimized retailer, increased fees at the bank, etc. That fact really should be part of the disclosure process.
Ulf Mattsson
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Ulf Mattsson,
User Rank: Moderator
11/1/2014 | 3:02:01 PM
EMV chip technology does not protect
I agree "That's because the total volume of card-not-present transactions are rising, and the bad guys will go after the easier targets as PoS systems get better locked down".

My main concern is that "EMV chip technology does not protect against malware attacks like those we have been reading about in the news, nor does it prevent card-not-present attacks" according to the new head of the PCI Council.

I think that more modern cost effective data protection, like data tokenization, should be used for all sensitive data, including personal data.

Recent studies reported that data tokenization can cut security incidents by 50 % compared to use of encryption.

I think it is time to secure the sensitive data in the entire data flow with modern approaches.

Ulf Mattsson, CTO Protegrity
Ed Telders
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Ed Telders,
User Rank: Apprentice
10/31/2014 | 5:14:31 PM
A partial solution
The roll out of Chip and Pin will certainly reduce some risks.  But as always there is that tendency to think of these advances as a silver bullet.  Well unfortunately you are quite right, the CNP will continue to increase, particularly for the "smaller transaction" where the risk for the retailer would seems smaller, but as an aggregate, it will be a lot of fraud.  Also don't forget that getting a card number is not difficult outside of the retailer's environment.  I participated in an investigation where a malicious actor was conducting a very effective method of identifying valid card numbers by simply calling the card provider with a retailer's store identifier (easily obtained), used a phone spoofing technique to make the call appear to come from the "800" number of the retailer's PBX system, and conducted what are called "Zero-Auth" transactions.  That kind of transaction essentially asks the card provider to validate that the card number is a valid card number.  The malicious actor had thousands of valid card numbers in just a few minutes as a result.  With social media sources and all of the "big data" that is available it doesn't take long to associate a valid card with a name to use for CNP transactions.  None of that kind of attack even touches the retailer directly, and consequently the retailer is not actually a victim of the attack, nor is it a breach since it did not involve the retailer's systems at all.  The only victims are all of us collectively since even if we aren't directly involved, all the expenses related to card fraud eventually gets paid for by increasing fees and costs as these losses are recuperated by the retailers, card processing companies, and of course the banks.  The consumer pays the ultimate price for all of this.  Nonetheless, the push for Chip and Pin is a welcome direction.
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