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Verifone: Steal This Card Data

March 9th, 2011

Stiel also addressed the encryption concerns. “I agree Square could and should improve the security of the card readers by injecting encryption keys into the readers. However, the technology and ‘parts’ that hackers need to skim cards is far more easily available from any Radio Shack or Fry’s Electronics in far larger quantities than will ever be available from Square” and he added “After all, fraudsters could as easily clone a look-a-like Verifone mobile card reader as they could write a bogus app for their iPhone.”

Square CEO Jack Dorsey issued a brief statement on Square’s site reacting to VeriFone’s efforts. “Today one of our competitors alleged that the Square card reader is insecure. This is not a fair or accurate claim and it overlooks all of the protections already built into your credit card.”

Dorsey also alluded to the fact that the weakness in question has to start with a customer handing a payment card to the thief.

“Any technology—an encrypted card reader, phone camera, or plain old pen and paper—can be used to ‘skim’ or copy numbers from a credit card,” Dorsey said. “The waiter you hand your credit card to at a restaurant, for example, could easily steal your card details if he wanted to—no technology required. If you provide your credit card to someone who intends to steal from you, they already have everything they need: the information on the front of your card.”

VeriFone seems to have gone out of its way to try and provoke Square. In the video, the narration contrasts Square with “VeriFone and other reputable vendors.” VeriFone’s Web site has a permanent column labeled: “Square’s Ongoing Security Challenges.”

VeriFone’s Web page promised that, on March 9, it would turn over its application to various payment players. “Today we are handing a copy of the application over to Visa, MasterCard, Discover, American Express and JP Morgan Chase (Square’s credit card processor), and we invite their comments,” Bergeron said.

What makes that move interesting is Chase. Had VeriFone left it at the four largest card brands, company officials could have argued (whether it would be with a straight face or not is another question) that this was an honorable altruistic move to help the security community. But by publicly including Square’s processor, it makes it almost impossible to paint as anything other than a vindictive move against a much smaller competitor.

VeriFone’s campaign is especially odd because, though it’s apparently aimed at consumers, there’s probably not one consumer in 1,000 who would have any clue what VeriFone is talking about. Consumers don’t know about PCI or encryption. Consumers assume that retailers (and anyone else) they hand a payment card to has full access to the data on it and will keep that data as long as they like.

This is not to suggest that Square hasn’t had its own legal issues.

But card skimming has been easy and cheap for years. Wireless card readers cost less than the iPhone or iPad that a Square dongle plugs into, and one reputable magazine published an article a few years ago detailing how to build a magstripe reader for $40. Similar readers have been sold for other handheld devices for almost a decade.

It’s hard to envision the significance of it being easy to turn a mobile card swiping dongle into a card skimmer. First, it’s not that hard to do. Secondly, it’s only an issue if the thief already has access to the consumer’s credit card. And third, given the low costs of skimming for years, it seems unlikely that there are lots of thieves out there, who were awaiting an even cheaper skimming method. Skimmers have always been quite low cost.


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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