Dynamic Online Card Security May Get a Boost from EMV Shift

With the EMV migration in the U.S. in full swing, fraud is making its own migration to card-not-present (CNP) transactions, and one way to thwart the fraudsters is a digitized card security code—provided the technology can be produced for a mass audience.

Oberthur Technologies, for example, has launched a "dynamic" card verification value/code, or a miniature screen on the back of a card that replaces the static box where the card's security code resides.

The security code will change regularly and appear on the card's screen. Consumers then use this changing code when making purchases online—if the online purchase is compromised, the crook can only benefit from the stolen code for a short period.

"If a [thief] tries to use that card data, he won't know what the [security code] is, except for the first 20 minutes or so, and the transaction with the stolen information will be declined," said Martin Ferenczi, president of the North American Region for Oberthur Technologies.

The concept of a card that displays a dynamic security code generated some interest years ago as a means to improve online banking security. However, most banks chose software-based alternatives, which were less expensive and did not require a significant change in consumer behavior.

Oberthur is still working on its pricing, Ferenczi said. The company is developing a way to mass produce the cards, screens and supporting technology, which he said cost more than traditional cards.

"It's a brand new product and we are industrializing the process," he said. "Having said that, we are in position to start pilots in the U.S., and European users have also expressed an interest."

Oberthur will ship samples of the new card in the fourth quarter, with commercial shipment expected to commence in the first half of 2015, Ferenczi said.

The expense of the digitized cards has made adoption of similar cards a challenge in the past, said Julie Conroy, a research director at Aite Group.

"I've seen them used selectively in commercial card applications or for high net worth individuals, but not a lot of traction beyond that," Conroy said. "As the U.S. moves to EMV, I think there will be increased interest among issuers, however, particularly if Oberthur's scale can help them create come cost efficiencies, and make the cost more attractive."

The cards may require a significant effort on the part of issuers, said Avivah Litan, a vice president and security specialist at Gartner.

"This sounds like a good idea but it requires card issuers to issue these cards to consumer and for consumers to get used to them," Litan said. "It also requires the issuers to modify their systems."

Most experts expect CNP fraud will spike in the U.S. following the adoption of EMV, as it has in Europe. E-commerce is also on the rise in the U.S., making CNP fraud a more attractive prospect. 

"The chip technology is solving the problem of counterfeiting the card, but with CNP fraud we are trying to solve the problem of having card information stolen from you," Ferenczi said.