PREVNEXTSUBMITMenuResourcesGlossaryTranscriptClear and return to MenuSearch ResultsFilterSlide TextNotesSearch in:Check to includeSearch...TermsDefinitionFINISHfinishdefinitionresourcessearchpauseplayreplaysubmitnextpreviousvolumeSkip Navigation. Hit enter to return to the slide.SUBMIT ALLsubmit allQuestion ListMore infoSend an emailCloseBioExit<html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Welcome to Module 5 of the Discover online EMV training program. In this module, we will take a closer look at payments using contactless technology, as well as the proximity technology known as Near Field Communications (NFC). </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>By the end of this module, you should be able to: Describe the primary markets for contactless payments; define contactless technology and state its key benefits for consumers, merchants, and issuers; explain how contactless technology lays the groundwork for mobile payments; explain the different chip card types; define NFC technology and explain how a contactless D-PAS transaction works; and describe the payment brands’ contactless solutions.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contactless technology has traditionally been used in cash-intensive markets that feature low average tickets and where speed of throughput is important. The key business driver of contactless for financial institutions is its potential to replace cash payments with card payments. In the U.S., for example, the majority of consumer payments are still made with cash. This represents a huge untapped market for financial institutions. A significant proportion of these cash payments are made in retail environments where convenience and speed of transaction are at a premium and traditional card payments are not always accepted. Contactless opens up these important markets to card-based payments. Acquirers and issuers should consider the opportunities and potential benefits of implementing contactless solutions in market segments that remain largely cash- intensive today.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Let’s go through some of the underlying considerations Discover had in mind when designing its contactless solution.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>First, contactless technology facilitates faster payments: faster than paying with cash, and faster than swiping or inserting your payment card. This means faster checkouts for the merchant and less time waiting in line for the customer.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>In addition to providing enhanced speed of service and a vehicle that encourages the replacement of cash, contactless also uses built-in chip security features to ensure that each and every transaction is secure for both the customer and merchant.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Finally, as with any Discover-issued card product, a key objective is global interoperability. Therefore, any contactless D-PAS card product, issued anywhere in the world, can be used on any device that supports Discover contactless payments.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>What makes contactless beneficial to the Customer?</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contact EMV and magstripe cards rely on physical contact between card and terminal, whether through the contact plates of the microchip or through the magnetic stripe on the back. There are various factors that can influence proper functioning, such as static electricity, humidity, or a faulty chip reader that may prevent a chip transaction from completing successfully. This is not true for contactless, as there is no physical contact between card and terminal.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Another benefit of contactless for the customer is the added convenience of multiple form factors. If offered by a customer’s bank, mobile devices, key fobs, and wearables can be used to emulate a contactless smart card.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Since contactless has been designed for quick, convenient, and intuitive usage, the cardholder experience at the point of sale is simplified and improved. The cardholder simply taps the card or other form factor into the clearly designated area.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Finally, when using contactless, the card or other device never leaves the cardholder’s possession. In today’s payment world, it is important for a cardholder to maintain possession of their payment method to avoid card skimming and theft. Retaining possession is the practice in Europe and many other parts of the world.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Now, let’s take a look at the benefits to the merchant.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>For certain merchants where speed of service is critical, the main advantage of accepting contactless is that it can dramatically reduce transaction times. This results in higher throughput at the checkout. One leading quick- service restaurant chain reported that every 12 to 18 seconds saved at the drive-thru led to a 2 to 3 percent increase in unit sales.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>A second factor that makes contactless more attractive to merchants than cash is that customer purchasing power is no longer limited by the amount of cash a person has on hand. This also facilitates the merchant’s ability to upsell during the transaction, increasing sales.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Because the inherent strengths of contactless are speed and convenience, customers might prefer merchants offering contactless payments over their competitors not offering this option.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>As cash migrates to contactless transactions, this also lessens the costs associated with handling cash. For example, shrinkage due to theft and error can be reduced.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Finally, the deployment of contactless is straightforward, since it leverages the existing Discover network certification processes and is based on contact D-PAS.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>What makes the contactless proposition attractive to issuers?</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contactless offers a net gain to the issuer each time cash is replaced. This proposition will help issuers increase their volumes of card-based payments without cannibalizing contact card transactions for contactless. These are net-new card transactions.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>As cardholders welcome the convenience offered by contactless payments, issuers can expect to see incremental transactions resulting from increased usage, as well as incremental spend due to cardholders no longer being limited by cash on hand.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Finally, since convenience is highly valued by cardholders, it will help reduce attrition and increase loyalty to the issuer’s card program.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Let’s take a look at the steps involved in a contactless transaction, from the customer perspective. This example shows a transaction with the LED illuminated and an audible beep for a reader with a display. Information displayed on the reader is for description purposes only. Select each step.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>[Step 1] The purchase amount has been entered by the merchant. The reader is in ready state, waiting for a cardholder to present the card on the reader’s landing zone, which is indicated by the contactless symbol (a hand presenting a contactless card). The transaction amount (in this case $12.74) is displayed. The leftmost LED of the reader flashes.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>[Step 2] The cardholder holds the card on the landing zone until all four of the LED lights are illuminated in green and the reader responds with an audible beep.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>[Step 3] The card can then be removed from the reader’s landing zone. The terminal processes the transaction and displays the completion result.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'></textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'></textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Let’s now look at Discover’s contactless evolution. After extended trials starting in 2007, Discover publically launched its mag stripe contactless program in 2010, offering cards and stickers enabled with ZIP contactless functionality.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>The latest version of Discover’s contactless solution, made available in 2014, is based on the full D-PAS specification. It has the same enhanced security and issuer risk management as contact EMV.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contactless D-PAS terminals and cards are backward-compatible with ZIP. Both include support for legacy ZIP to ensure that ZIP Cards will be accepted at contactless D-PAS terminals, and that contactless D-PAS cards will be accepted at ZIP terminals.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Near Field Communication (NFC) is a transmission or communication protocol that enables contactless payments for mobile handsets with payment functionality. It allows mobile devices to communicate with a payment reader when they are in close proximity (less than approximately 1-2 inches).</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>NFC-enabled mobile devices leverage the ISO 14443 standard, just as contactless cards do. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>NFC Mobile technology is generating strong momentum. In September 2014, Apple included NFC compatibility and an embedded secure element in its iPhone 6 and iPhone 6 Plus models. The launch of Apple Pay has reinvigorated NFC as the leading technology for in-store mobile payments.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Several NFC mobile initiatives have been deployed in recent years and are at various stages of pilot or rollout; for example, Apple Pay and Android Pay.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>The major problems with the adoption of these programs were the lack of handsets that offered NFC technology and a very limited number of places to make purchases with NFC-enabled wallets. Now that Apple has launched NFC-enabled phones and Apple Pay, and because Android-based phones and wallets are already in the market, the NFC mobile market is finally set for rapid expansion. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>There are three types of integrated circuit cards. Select each button to learn more.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>[EMV Contact] This image shows an EMV contact card that has only one interface to communicate with the integrated circuit on the card. The terminal contains electrical connections that touch the contact plate on the card and allow signals to be passed between card and terminal.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>[Contactless Only] This diagram shows a contactless only chip card, where the chip and connected antenna are embedded inside the card body. The terminal generates a radio frequency field that produces electrical signals in the card antenna, allowing data to be passed between card and terminal</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>[Dual Interface] This diagram shows the dual interface card, which is how many issuers are deploying their cards today. Dual interface cards are chip cards that can communicate with the terminal through either the contact interface or the contactless interface.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>On the top layer is the contact chip interface.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>The middle layer is made of an inlay incorporating the chip, also called the module, and an antenna connected to the chip. The chip antenna is usually positioned around the perimeter of the card. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>With the contact interface, the card is inserted into the chip card reader. The chip is powered by the terminal, and the data is read through this contact interface.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>With the contactless interface, the card is presented near the radio frequency reader landing zone. The radio frequency reader field powers the chip and passes information between the card and the terminal. However, the two interfaces may not be activated simultaneously.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'></textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'></textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>To exchange data over the contactless interface, both the card and the terminal need to be equipped with an antenna.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contactless chips are powered by and communicate using radio frequency (RF) energy provided by the contactless terminal. In simple terms, the terminal makes energy available to the chip by inducing an electromagnetic field into the air close to the terminal. When the chip is moved into this field, electrical energy is provided to it via the antenna (a coil of wire). This energy is used to power the chip; the contactless card or device does not need a battery. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>The contactless chip is encoded with data and contains cryptographic information that is used to authenticate the card or device to the issuer.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>In addition to powering the chip, the terminal communicates information to the card by changing the amount of energy sent. The chip detects the changes and captures messages from the terminal. The chip is also able to send messages to the terminal by changing the amount of energy that it uses. The terminal detects these changes and uses this to interpret messages that are sent back to it. In this way, the D-PAS chip and terminal can communicate quickly and interactively.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>An NFC-enabled device can operate in card emulation mode, which allows it to emulate a contactless smart card and to be used to pay for merchandise at a merchant’s contactless POS.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Credit/debit payments need a very secure environment in which to store data and perform contactless transactions. The secure element (SE) within a mobile device provides a tamper-proof environment for storing data, performing cryptographic functions, and ensuring transaction security. Because of the secure element, NFC offers strong cryptographic options, enabling financial or other forms of secure transactions. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>The secure element in an NFC-enabled handset can be located in one of three locations: embedded within the device; in a removable SIM; or as a separate device, such as a microSD card</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contactless card credentials may also be stored securely in the cloud using Host Card Emulation (HCE).</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>When the consumer requests a mobile payment service, the service provider must check that the consumer is eligible for the service: that is, that the consumer’s mobile environment is compatible with the service (for example, mobile network, mobile device type, secure element capability).</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Once the eligibility check is done, the payment account must be provisioned onto the NFC mobile device, similarly to the data used for the personalization of traditional payment cards.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>A new model for provisioning has emerged to address the difficulty of personalizing products for NFC-enabled mobile devices. Personalized account information is sent over-the-air (OTA) to mobile devices using trusted service managers (TSMs), who are third parties working with the payment account issuer. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>This animation illustrates the high-level transaction flow for the contactless D-PAS application in the EMV mode. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Contactless D-PAS relies on and leverages the existing EMV acceptance infrastructure. The EMV and D-PAS concepts have been optimized to achieve a high level of security while also making the dialog short and fast between the card and terminal. The number of commands and data elements exchanged between the card and terminal are minimized to enable optimized transactions between a contactless D-PAS card and terminal. The total duration of exchanges between the contactless card and the terminal should not exceed 500ms. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Unlike contact D-PAS transactions, the reader performs some checking before the card enters the RF field and after the card has left the RF field. To minimize the time that the card must be in the field, the reader performs a preliminary processing check prior to the activation of the contactless interface.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>When the dialog between the card and terminal is completed, the terminal has gathered from the card all the required information to proceed with the transaction and is able to decide whether the transaction should be completed in an offline or an online mode. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>At the completion of the transaction, the card no longer communicates with the terminal.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Let’s take a closer look at the transaction flow. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>During the preliminary processing, the terminal performs risk management checks by comparing the transaction amount to limits set in the terminal. This is to identify the applications that are not eligible to be added to the candidate list; determine if the transaction can be processed offline; and enable the Cardholder Verification Method (CVM) that is eligible for processing.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>The contactless D-PAS application selection mechanism is the same as that for Contact D-PAS, except for the selection methods that are allowed. To optimize the transaction processing flow, the application selection directory method [using Proximity Payment System Environment (PPSE)] must be used for contactless D-PAS cards.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>After the application has been selected, the terminal initiates the transaction by sending a request to the contactless card for information to determine the functions that the chosen application supports, and the location of the application’s data.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>A Get Processing Option exchange is made with all relevant data elements. To decrease the number of exchanges, the application sends the Cryptogram Information Data in the GPO response. This is a fundamental new mechanism as compared to the EMV contact dialog, and it is designed to shorten the dialog between the card and the terminal.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Once this short but comprehensive exchange of data is completed between the card and terminal, the terminal goes on with executing the transaction based on data and parameters sent by the card. The terminal will check whether the card is genuine by performing card authentication based on CDA (Combined Data Authentication).</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>As is the case for EMV contact card specifications, each global brand has developed its own contactless card specifications. These specifications enable card manufacturers to offer contactless chip cards that are loaded along with the application required to support each brand. A Diners or Discover contactless card will require the specific D-PAS application be loaded on the chip. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>For contact transactions, the terminal requirements for EMV level 2, which defines the functional and application level, are identical for all brands. The “application kernel” is the software module, core, or library, forming part of a complete terminal application architecture that is developed for exclusive support of the EMV debit/credit functions and application requirements. Application kernels are functionally tested and approved by EMVCo. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>With contactless, an important difference is that each card brand has its own EMV Level 2 requirements. Therefore, several kernels are specified for contactless, as opposed to only one for contact EMV. The Discover kernel specification is referenced as the Kernel C-6. </textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>An important observation is that, while the kernel requirements and specifications are specific to each brand, they are managed by EMVCo. A consequence of this is that, in order to support multiple contactless brands, the terminal will need to manage multiple kernel configurations.</textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Now that you have reached the end of this training module, you should be familiar with the main concepts introduced throughout. Please review the objectives shown here and, if required, go back through the module so that you’re able to address them confidently. </textformat></html><html><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Before we begin this course, let’s look at the user interface.</textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'></textformat><textformat leading='0' tabstops='[0, 48, 96, 144, 192, 240]' blockindent='0' indent='0'>Please read the instructions on how to navigate through the course. After reading the instructions, click Start Program to launch the course.</textformat></html>