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Second Major Milestone for EFTPOS Terminal Upgrade

Second Major Milestone for EFTPOS Terminal Upgrade

- First terminals to be phased out & upgrades installed -

Statement made by Darryl Roots, Business Development Manager, ETSL

From today some 35,000 EFTPOS terminals will be phased out over a two year period as part of the national EFTPOS terminal upgrade programme which includes support for the global EMV/3DES standards.

The terminals, which currently run on ETSL’s specification 3.4** or below, are being phased out as they are not able to support the new EMV standard or the 3DES* (Triple Data Encryption Standard) security standard being progressively introduced by ETSL. Using EMV/3DES will ensure consumers and merchants have the most up-to-date security available to them when transactions are made across the Paymark network further reducing the chance of fraud.

The national upgrade programme will ensure older terminals are phased out to be replaced by new terminals and software. The new equipment is certified to the Paymark Eftpos 5.0 terminal specification which includes the capability to support the global EMV/3DES standards.

For the cardholder, the upgrade programme means better protection against misuse and fraud, plus, over the long-term, the new technology allows the possibility of new reward schemes and loyalty programmes.

For merchants and banks the major benefits come in the form of improved security features that cut down the potential for fraudulent transactions. The adoption of this technology is likely to lead to a reduction in the number of transaction disputes by providing a new way to check that the card is not counterfeit.

Today’s announcement represents the second major milestone in the EMV/3DES national EFTPOS terminal upgrade programme that has been planned for some years and is part of a global initiative promoted by the various credit card companies.

Existing EFTPOS terminals will continue to be supported so there is no immediate requirement for merchants to change their current terminal equipment.

Deadlines for the phasing out of old terminals have been set with a long lead time to reduce the impact on merchants, retailers and banks.

A minimal number of merchants will be affected this year with more affected as the 2006 deadline get closer. The overall upgrade programme will see banks and terminal vendors are working with merchants towards the phased introduction of equipment within the next four to five years.

Ends.

*3DES, also known as Triple DES, stands for Triple Data Encryption Standard, which is a strong form of encryption. This provides further protection for cardholder PINs when transmitted over the Paymark network. DES is an algorithm (a mathematical equation) that is used to encrypt data. The data fed through DES encryption is encrypted once using a secret key. With 3DES, three stages of DES encryption are applied, with separate, secret keys for each stage.

** ETSL specifications set the standards for EFTPOS terminals and the way they are operated—there are currently eight specifications in the market, introduced as technology developed, which are all being phased out so the new 5.0 & 5.1 specifications will become universal.

For further information please visit the EMV/3DES centre at www.paymark.co.nz for further background, definitions, Q&A, participants and lists of approved equipment.


Brief Background

One global standard - EMV

Because payments processing is a global activity, a common standard, or specification, called EMV (Europay, MasterCard, Visa) has been introduced to allow the global compatibility of chip cards and EFTPOS terminals.

These new cards carry a microchip (most have a magnetic stripe as well). This technology brings some important changes and benefits to cardholders, merchants, credit card companies (such as Visa and MasterCard) and banks.

For the cardholder there is better protection against misuse and fraud, plus, over the long-term, the possibility of new reward schemes and loyalty programmes.

For merchants and banks the major benefits come in the form of improved security features that cut down the potential for fraudulent transactions. The widespread adoption of this technology is likely to lead to a reduction in the number of disputes by providing a new way to check that the card is not counterfeit.

What is 3DES ?

While implementing the new EMV requirements, Paymark EFTPOS is also taking the opportunity to strengthen security by introducing 3DES to financial transactions made across the Paymark network. 3DES, also known as Triple DES, stands for Triple Data Encryption Standard, which is a strong form of encryption. This provides further protection for cardholder PINs when transmitted over the Paymark network. DES is an algorithm (a mathematical equation) that is used to encrypt data. The data fed through DES encryption is encrypted once using a secret key. With 3DES, three stages of DES encryption are applied, with separate, secret keys for each stage. With DES, the key length is 56 bits which means 72 quadrillion possible combinations. With 3DES, three stages of DES are applied, so the key length in 3DES is 168 bits, which means 374 octillion possible combinations, so it's significantly stronger. Using 3DES will ensure consumers and merchants have the most up-to-date security available to them when transactions are made across the Paymark network, further reducing the chance of fraud. The EMV Advisory Group, was formed in November 2002 by Paymark EFTPOS to implement EMV standards in New Zealand. The primary role of the group is to develop and implement a programme for Paymark EFTPOS owner banks and industry participants. This ensures all participants use the same system and therefore chip cards can be accepted throughout New Zealand.

Further background

Visa and Mastercard’s global EMV mandate requires all of New Zealand’s EFTPOS terminals to be upgraded.

The upgrade will enhance card security for consumers, merchants, retailers, banks and card issuers. It will also assist in reducing credit card fraud, which is on the increase in New Zealand.

The new EMV/3DES standard terminals are safer, more reliable and more secure than ever before.

ETSL has been advising merchants to only purchase EMV standard terminals because terminals that do not meet the EMV standard are being phased out over the long-term.

The card scheme mandates mean that over time all new EFTPOS terminals must be able to support the global EMV standard.

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