Evan Schuman's StorefrontBacktalk

Now that Verifone has confirmed one of its popular U.K. PIN pads was hacked by a researcher for last week’s Black Hat security conference, is it time to rethink how POS devices can be maintained, managed and upgraded? It’s very convenient to do so over a network or, in the case of Chip-and-PIN devices, using special maintenance cards. But we may be at the point where that’s simply not secure.

To be clear, Verifone only acknowledged that one of three hacked PIN pads came from it. In addition, the secure electronic payment technologies vendor said it’s already testing a fix. Great—that means other PIN pad vendors have similar security issues. We just don’t know which ones.

In the demonstration on July 25, researchers from U.K.-based MWR InfoSecurity said they bought second-hand PIN pads on eBay to test and found that two of the Chip-and-PIN devices popular in the U.K. could be breached by means of specially programmed smartcards. A third device, used in the U.S., could be breached in multiple ways, including via Ethernet and mobile-network interfaces.

Technical details in the demonstration were sketchy, and the researchers taped over the identifying logos on the devices. But Verifone later owned up to one of the devices, saying it had a fix in the works, while pointing out that the attack was complex, new and only works on older devices using a specific optional software module. July was not a good month for Verifone’s PIN pad security image; three weeks ago, German security researchers demonstrated how they could hack a popular Verifone PIN pad to capture card data and PINs and play Pong.

That German attack exploited problems in the PIN pad’s network software. But in the Black Hat demonstration, the Chip-and-PIN devices could be breached just by inserting a specially programmed card that took control of the PIN pad.

That shouldn’t be possible. Only data associated with a transaction—well-defined messages between the card and the device—should be going back-and-forth. A bad message should result in a rejected transaction. It’s supposed to be a smarter, and thus more secure, version of a magstripe swipe. (And yes, there’s a real irony in the fact that a magstripe swipe would never be able to take over an unmodified PIN pad this way—it takes EMV to make that possible.)

But obviously, it did happen. The researchers blamed it on a problem with the payments application in the PIN pad, but they may just be being kind. This could well be a designed-in security hole.