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SECURE ELEMENTS VS CLOUD-BASED HCE: WHAT IS MORE SECURE FOR NFC MOBILE PAYMENTS?

SECURE ELEMENTS VS CLOUD-BASED HCE: WHAT IS MORE SECURE FOR NFC MOBILE PAYMENTS? 1

With the introduction earlier this year of Host Card Emulation (HCE) and last month’s reveal of the iPhone 6, Near Field Communication (NFC) technology is making a strong move to fulfill its promise to be the dominant “physical world” payments technology.

The reinvigoration of interest in NFC is raising the stakes for enabling technologies that make secure mobile payments possible. And as discussions move from “if” to “when,” implementation issues come to the forefront, with no issue bigger than security. That’s especially true between the proponents of on-device secure elements versus cloud-based cards HCE.

The arguments for superior security from both sides of the debate lead me to reflect on an old saying that goes “absolute security is only attainable when you’re protecting something absolutely worthless.” No matter the effort to protect something, any security can be defeated given enough time, money, and technical resources. In other words, there is no perfect security, just better or worse security. So which security is better — hardware-based secure element or cloud-based Host Card Emulation? From a security perspective, both of these competing technologies have persuasive arguments in their favor.

The Secure Element

Lance Johnson

Lance Johnson

Years of effort have gone into developing a trustworthy mobile payment solution that relies on highly secure, tamper-resistant secure elements (SE). A secure element can be thought of as a smart card in the phone isolated from tampering by a restricted access interface and strong encryption. The standard in Europe for over 20 years, EMV smart cards — so called “chip” cards — have virtually eliminated many types of fraud still common in the US. In fact the US is finally adopting EMV standards. Based on proven EMV smart card technology, secure elements are very tough nuts to crack. They are tested against a set of requirements defined by the payment networks and only those that can satisfy the evaluation criteria are allowed to store payment credentials. Extreme efforts and corresponding time and money are required before there is any hope of success with limited value to the successful attacker.

Additionally SE’s have the added benefit that the fraud opportunity is limited to each device. That is only a small amount of data is stored on them (single customer credentials and device specific cryptographic information). This restricts the opportunity of any hacker to the value of each device. In other words, to get lots of fraud value the hacker must compromise many individual devices.

HCE, Tokens and Device Fingerprinting

HCE assumes that any data stored on a handset is vulnerable and therefore restricts the storage of sensitive data to host or “cloud” databases. These databases must be managed to a high security standard. The security requirements are a very high level, exceeding common security (e.g. PCI DSS) and equivalent to card personalization bureaus. They have to be; the concentration of payment information and credentials is a very attractive target.

Preventing unauthorized access in HCE depends on four pillars: limited use keys, tokens, device fingerprinting, and transaction risk analysis. Limited use keys expire quickly preventing their misuse. Tokens reduce risk by replacing the PAN with limited use data that passes seamlessly through the payment system. Device profiles (fingerprints) validate the phone. Data analysis provides real-time transaction assessment to identify unusual activity. In short, HCE security relies on managed intelligence at the device and systems levels by leveraging the “always-on” and “big-data” ecosystems. The more data used to measure and analyze, the better the overall security.

Regardless of technology, an on-device a client must control secure storage, should collect locally available data, perform risk assessment (according to pre-defined rules), and trigger updates. The backend is constantly communicating with the client, testing the information and validating actions according to the risk tolerances of the card issuer. HCE benefits more since it is designed to utilize these backend systems more effectively, but SE is less reliant on “always on” networks.

Apple Pay: All the Above

Apple has recently demonstrated aspects of both secure element and cloud-based HCE technology can be combined into one solution. Apple Pay uses the secure element to store tokens and the payment client and adds biometrics with Touch ID for multifactor authentication. It allows Apple to use the power of local and backend data for risk management while removing all doubt about the security of a token or credential. By using the best of both worlds and adding a few new wrinkles, Apple has built a strong system. It is a fair estimation that Apple Pay will earn a “Pass” on the security test.

So what is better?

Host-Card-Emulation-VS-Secure-Element_SMALLActually, that is the wrong question. The real question is whether either technology reaches the level of security needed to protect payment data. The introduction of Apple Pay, a hybrid solution, shows that a secure element versus HCE debate is too focused on technology and not on an overall effective solution. In fact where the debaters lose site of the objective is in having a debate at all. This isn’t a competition, it is an examination graded only as “Pass/Fail.” Depending on how they are deployed either can Pass (or Fail).

Bottom line is that if you are fortunate enough to have an SE, then use it. But if you don’t have use of secure elements, then focus on HCE which is supported by the majority of smart phones. Banks and merchants can deliver secure mobile payments to consumers today using HCE with tokenization, device fingerprinting, risk modeling and robust on-device software. You may have the added advantage of delivering services through your own branded apps instead of a wallet, preserving your consumer connection.

What banks and merchants must adapt to is an environment where secure elements and cloud-based HCE will co-exist. The key is to understand the strengths and weaknesses of each and deploy solutions that can leverage both, because that is the only way 100% of consumers will be served.

Written by: Lance Johnson

Lance Johnson is the Chief Security Officer of Sequent. Lance is a 30 year veteran in banking and payment services, having spent spent over 20 years at Visa as the Senior Vice President responsible for payments risk and fraud control operations and later Senior Business Leader responsible for Payment System Risk Strategy and Policy.

Technology

How sustainable AI improves the triple bottom line

How sustainable AI improves the triple bottom line 2

An investment in green AI enables financial services firms to align people, profit, and planet

By Nick Dale, EVP business development, Verne Global

Green investing is widely regarded as a mega trend, with chief executive Larry Fink of BlackRock, the world’s largest money manager, stating, “Climate change has become a defining factor in companies’ long-term prospects … awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”

The recent seismic shift in public opinion about climate change has not only increased attention on the sustainability and societal impact of investing in a company, it’s also influencing the decisions being made in finance industry boardrooms overall, whether that’s implementing innovative business models or adopting new partnerships and technologies. However, as business leaders strive to make green choices, many are unaware of the hidden environmental costs of the technologies they are employing.

AI in the finance industry

The use of AI has become ubiquitous across industry sectors, and is now an integral part of the technologies being used in financial services, from optimising asset portfolios and underwriting loans to assessing risks.

AI is especially beneficial for things like quantitative trading, which uses large data sets to identify patterns that can then inform strategic trades. AI’s machine learning models can analyse vast and complex data and make predictions accordingly. But AI models are not only data-hungry, they are power hungry.

Power-hungry AI

Supercomputers train and test mountains of data for AI models, and can run 24-hours a day, for hours, days, or even weeks. These applications consume huge amounts of energy, and as AI technology continues to grow and develop, the computations behind it are also increasing in size and complexity. The carbon emissions from training a single AI model for language translation is roughly equivalent to 125 round-trip flights from New York to Beijing (AI Now 2019 Report).

The carbon cost of AI becomes even higher when you factor in the energy required to keep the computing equipment housed in data centres cool – overheating can impact performance and damage equipment. As a result, in a conventional data centre, at least 40% of all energy consumed goes towards cooling.

But sustainable AI is possible if financial services organisations take positive steps to minimise its environmental impact.

Minimising AI’s carbon footprint

Location, location, location

Many tech giants are committing to reducing their carbon footprint, with Amazon pledging to reach 80% renewable energy by 2024, and Google investing in data centres in Nordic countries specifically for better energy efficiency.

Nick Dale

Nick Dale

This is because in the Nordics, data centres are largely powered by renewable energy sources. Iceland, in particular, uses 100% renewable hydroelectric and geothermal power – with no nuclear power sources – and is connected to a reliable power grid. These renewable energy sources are much less harmful to the environment because, unlike fossil fuels, they don’t cause pollution and don’t generate greenhouse gases. Not to mention, renewable energy is based on natural resources that can be replenished within an average human lifetime, as compared to fossil fuels, which can take thousands—or even millions—of years to replace.

Over 80% of compute doesn’t need to be near the end-user, and in those situations, choosing data centre locations in cool climates has a significant impact on carbon emissions. AI compute can be located in places like Iceland, which can utilise all-year-round, free cooling due to its temperate climate.

Data centres that are located in hot climates, like Arizona in the US, require high-powered cooling systems in operation around the clock. With average high temperatures of 40° Celsius in the summer, these data centres can use up to 4 million gallons of water a day to absorb heat through evaporation into cooling towers. Consequently, when location doesn’t hamper performance or accessibility, housing AI compute in data centres with natural cooling is a no-brainer.

Energy efficient and cost-effective

Many in the financial sector have traditionally viewed sustainability as a trade-off between profit and planet, but when it comes to green AI, financial services firms can have it both ways. By housing the servers that train AI models in data centres powered by renewable energy sources, businesses can substantially reduce energy expenses and benefit from long-term, fixed pricing.

And when renewable energy sources are combined with year-round, cool climates, the energy demands and costs of AI can be dramatically reduced. AI is here to stay, but by making the right choices, companies in the finance sector can still drive profitability whilst making real and measurable progress on sustainability.

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Technology

Survey of IT decision makers exposes the increased pressures IT organisations face amidst covid-19

Survey of IT decision makers exposes the increased pressures IT organisations face amidst covid-19 3

Independent Survey Uncovers the Limitations Traditional IT Infrastructure Imposes, Exacerbated by a Remote Workforce

Nebulon, Inc.®, the pioneer of Cloud-Defined Storage, released today the results of an independent survey completed by IT decision makers at 500 companies in the IT, financial services, manufacturing, retail, distribution and transport industries across the UK, US, Germany and France. Conducted in June of this year, the survey exposes the biggest challenges enterprises face in transforming their on-premises application storage environments, which have only been exacerbated during this COVID-19 era. While IT organisations cite multiple restrictions, the survey reveals limited infrastructure automation and high CAPEX as the most significant challenges for those deploying enterprise storage array technology, forcing them to re-examine IT spending and operations even more so than usual amidst the pandemic.

While increasing automation and reducing costs may seem like mainstream initiatives for any large organisation, the pandemic and resulting workforce restrictions mandate significant progress in days or weeks, versus months or quarters. The results of the survey, undertaken by Vanson Bourne, further reinforce this as respondents also highlighted their on-premises application storage environments are difficult to maintain, and reveal that they lacked the in-house expertise necessary to manage them. Even more disconcerting, respondents indicate that their traditional external storage arrays are not suited to handle new workloads, including containers and NoSQL databases. This is unsurprising as modern workloads have been architected for local versus shared storage resources.

British IT decision makers specifically ranked “expensive” highest, with 57% making this one of their top three challenges, followed by “time consuming to maintain” (50%) and “difficult to automate at scale” (49%). Respondents from smaller organisations (1,000-2,999 employees) were more likely to mark “lack of in-house expertise” highly compared to larger organisations (3,000+employees) (59% compared to 31%) while these larger companies were more likely to consider cost a top challenge (61% compared to 35%).

“The impact of the pandemic is forcing CIOs worldwide to reconsider their operations,” said Siamak Nazari, Co-Founder and CEO of Nebulon, Inc. “Reducing costs through server-based storage alternatives without the restrictions of hyperconverged infrastructure, and reducing operating cost pressure through cloud-based management of the application storage infrastructure are crucial initiatives for IT organisations looking to survive this new normal.”

For companies with a growing class of mission-critical data that cannot or should not move to the public cloud, Cloud-Defined Storage is an alternative to expensive storage arrays, offering enterprises a cloud-managed, server-based approach for mission-critical storage. By combining a cloud-based control plane, called Nebulon ON, with server-based storage that is powered by the Nebulon Services Processing Unit (SPU), Nebulon enables organisations to reduce cost for enterprise storage by up to half without compromising on enterprise data services. This is made possible by Nebulon’s unique architecture that makes use of commodity SSDs in industry standard servers, Ethernet in favour of Fibre Channel, and by eliminating operational complexities by moving management to Nebulon ON with an as-a-service model.

Nebulon ON uses AI to analyse application workloads during operations, provides actionable recommendations for IT organisations and provides a single API endpoint that greatly streamlines automation at-scale. Customisable application templates, tailored for customer’s application clusters, eliminate the guesswork in configuring infrastructure and produce repeatable, reliable infrastructure services for modern, mission-critical workloads. With the architectural and operational simplicity of Cloud-Defined Storage, application owners gain a self-service infrastructure provisioning that is unmatched with existing on-premises storage solutions.

“IT organisations have been seeking a cost-effective alternative to external storage arrays for years,” said Nazari. “With our Cloud-Defined Storage offering, they finally have the opportunity to reduce costs while also deploying a self-service solution for application owners that also reduces the operational burden.”

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Technology

Are you ‘prescribing’ the right security solution to your merchants?

Are you ‘prescribing’ the right security solution to your merchants? 4

By Sandra Higgins, Chief Marketing Officer at Sysnet Global Solutions, draws parallels between taking multivitamins for the body to keeping small businesses ‘healthy’ using an all-in-one security solution

When it comes to leading a healthy lifestyle, eating the right food, taking regular exercise, and maintaining a positive mindset are key. However, despite these best intentions and practices, you still might not get all the nutrients your body needs to ensure it is working as effectively as possible. To combat this, a doctor might suggest taking a daily multivitamin as an insurance policy, to guarantee the body gets all the minerals and vitamins it needs, avoiding any shortfalls. Makes sense, right?

This same logic can be applied to businesses and the importance of cybersecurity and compliance solutions, especially in the current climate and the risks associated with remote working. Like a doctor prescribing a multivitamin to help their patients’ minds and bodies function effectively, in the same way, acquirers can offer security ‘prescriptions’ to help merchants keep on top of business health. The prescription is then deployed by a security software provider, much like a pharmacy would, dispensing the multivitamin of data security services and tools to help keep businesses in good health.

Just what the doctor ordered

With a wide variety of data security and compliance solutions available, like the streams of vitamins you see on pharmacy shelves, smaller businesses can often become overwhelmed by the sheer volume of available tools and may forego sourcing their business ‘medication’ altogether.

Taking the stress out of trying to understand what the business needs, it’s an acquirer’s responsibility to prescribe one solution that allows merchants to stay security fit and prevents them from becoming overwhelmed at the choice available. That way, merchants don’t end up buying the wrong solutions or supplementary add-ons at additional cost, that they don’t actually need.

The benefits of an all-in-one solution

Like with medicine, merchants need to know the long-term benefits of prescriptions before administering it, and with an all-in-one solution, the benefits are vast. In addition to easy compliance with payments standards such as PCI DSS and access to security tools that are appropriate to business set-up, other benefits of all-in-one security solutions include;

  1. Increased energy levels. With business security taken care of, business owners will have more time to focus on what matters, giving them more energy to run other areas of the business.
  2. Reduced fatigue. If a business has to work hard to manage its security levels, or its owner is losing sleep over not managing it at all, resulting in overdrive just to perform simple tasks, being compliant with regulations, like the PCI DSS standard, becomes much harder.
  3. Long-term healthy lifestyle. By taking an all-in-one security solution, businesses will become ‘compliance and security fit’. Everything will run more efficiently, without security issues slowing things down and preventing a business from moving forward.
  4. Improved mood. Certain studies have shown that a daily multivitamin has positive effects on a person’s mood and emotional well-being. Not having to think so much about security and compliance lifts a burden and has the same effect – business owner don’t feel guilty about not paying it enough attention and there’s no need to worry about breaches or facing fees from not being PCI compliant.
  5. Reduced stress and anxiety. Similar to having an improved mood, by simply attending to security matters, businesses will have one less thing to worry about.

Strength in numbers

Not only is there a multitude of long-term benefits attached to having a fully managed data security solution prescribed by acquirers, allowing businesses to be faster, simpler and more profitable, it also means that costs are kept low. Many people buy vitamins in bulk to help share the cost with family or close friends. By buying security tools at scale, costs are kept down for merchants. This means that when a business is weighing up their budgets, they can be sure their compliance and security cost is entirely affordable.

When buying a multivitamin, customers will likely buy from a reputable brand so that you can rely on the quality and effectiveness of the daily dose, as reputable multivitamin providers undergo meticulous analysis and rigorous quality controls during the manufacturing process. In the same vein, humans wouldn’t want a substandard multivitamin for their own body, so businesses wouldn’t expect this from an acquirer’s prescription.

Easy to consume

Multivitamins can provide patients with numerous health benefits but the biggest benefit of all is having these solutions in one place. It makes it easier to ensure the body gets all it needs to stay healthy. It is the same thing for businesses. Taking a security ‘multivitamin’ will greatly take the stress out of addressing compliance and security, and provide a business with more time to focus on other pressing tasks.  If small businesses, in particular, can get into the habit of taking a regular multivitamin, a straightforward all-in-one solution, to address compliance and security at their business, they will be more open to trying other things too that may lead to an evolution of the business.

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