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User Rank: Moderator
10/5/2014 | 1:38:46 AM
Let me say, up front, that the whole architecture of the authentication/payment cycle is wrong.
Here's an easily implemented solution, which will leave the hackers with a lot of useless data, even if the retailer persists in storing card data in the transaction log, or a network snooper monitors all transactions:
1. The customer presents a credit card to the POS terminal
2. The (hopefully encrypted) card number is sent to the card validation server
3. Each customer has a secret keyword, like 'julyfourth', which only he knows, and which is never transmitted.
4. The validation server sends an alphabet, and a random selection of 1's and 0's to the POS terminal
5. The customer selects a pattern of 1's and 0's which match his keyword. This metadata is sent back to the validation server.
6. The validation server also selects a pattern of 1's and 0's which match the keyword.
7. If the two patterns match, the transaction is approved, if not, it's fraud.
Notice that, since the challenge is random, anyone trying to re-use it. will fail.
Additionally, if this system is used for card-not-present transactions, it is equally effective, and it doesn't rely on chips, biometrics, multi-factor authentication.
Oh, yes. It'll protect ATM transactions from spy cameras, network snoopers and other fraud attempts.