Security Experts:

Contactless Visa Cards Vulnerable to Fraudulent Foreign Currency Transactions

Researchers at Newcastle University in the United Kingdom have discovered a flaw in Visa's contactless credit cards that can be leveraged to steal large amounts of money from cardholders without knowing their PIN.

EMV (Europay, MasterCard and Visa) cards have been introduced all over the world in response to the recent wave of data breaches and magnetic-stripe payment card fraud incidents. These types of cards, which rely on a chip to make transactions more secure, can also be used for contactless transactions.

In the United Kingdom, Visa has introduced contactless payment cards that can be used to make transactions without the need to insert the card into a terminal and enter its PIN. However, to prevent abuse, these types of transactions are limited by the EMV system to £20 ($32). For larger sums, cardholders must enter the PIN.

The problem with the Visa cards is that they don't recognize transactions in foreign currency. Researchers have determined that transactions of up to 999,999.99 in any foreign currency are approved.

Fraudsters can set up rogue point-of-sale (PoS) terminals on ATMs and even on mobile phones.

"With just a mobile phone we created a PoS terminal that could read a card through a wallet," said Martin Emms, lead researcher on the project. "All the checks are carried out on the card rather than the terminal so at the point of transaction, there is nothing to raise suspicions. By pre-setting the amount you want to transfer, you can bump your mobile against someone’s pocket or swipe your phone over a wallet left on a table and approve a transaction.  In our tests, it took less than a second for the transaction to be approved."

Visa says it has reviewed the researchers' findings. The financial services company has pointed out that the research conducted by Newcastle University doesn't take into account the multiple safeguards that must be met to make a transaction possible in the real world.

"For these reasons we do not believe the findings to be a cause for concern, as it would be very difficult to complete a fraudulent payment of this kind outside a laboratory environment," Visa told SecurityWeek in an emailed statement.

"We spend €100m a year to beat fraud, and continue to bolster the safeguards in the payment system, which is why fraud rates stand at less than 5p in every hundred pounds. We are confident that our contactless system remains a safe, convenient way to pay," Visa stated.

The company said it started working on introducing additional security systems even before researchers reported their findings.

"We are updating the safeguards in the payment system to require more transactions to come online for authentication, making it even more difficult to make this kind of fraudulent attack," Visa explained.

Newcastle researchers admit that they haven't tested the backend of the system, and say they are aware that there are security mechanisms in place to prevent fraud. However, they have noted that the attack method they are disclosing is not just hypothetical.

 "Our research has identified a real vulnerability in the payment protocol, which could open the door to potential fraud by criminals who are constantly looking for ways to breach the systems. It is not clear from reading the payment protocol how banks would deal with the inconsistencies we have found through our research, hence we believe the vulnerability poses a very real, potential threat," Professor Aad Van Moorsel, Head of the School of Computing Science at Newcastle University, said in response to Visa's statement.

 "At the moment, the lowest hanging fruit with regard to payment card fraud is the magnetic stripe. With the magnetic stripe option currently being phased out, the next target that criminals will aim for is the contactless payment feature. If we can find flaws in contactless payment, then they will be able to do that as well. That is the purpose of this research: to find the holes and fix them before they can be exploited," Van Moorsel added.

The researchers are presenting their findings on November 5 at the ACM Computer and Communications Security (CCS) conference in Scottsdale, Arizona.

Late last month, SecurityWeek reported on a new automated tool that can be used by cybercriminals to send batches of fraudulent payment card charges to multiple gateway processors in order to avoid being picked up by fraud detection systemsCalled "Voxis", the platform helps increase the chances of having the fraudulent charges authorized by emulating human behavior and buying patterns.

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Eduard Kovacs (@EduardKovacs) is a contributing editor at SecurityWeek. He worked as a high school IT teacher for two years before starting a career in journalism as Softpedia’s security news reporter. Eduard holds a bachelor’s degree in industrial informatics and a master’s degree in computer techniques applied in electrical engineering.