Interac Association Chip readiness program Global Platform August 21, 2002 Global Platform August 21, 2002

2 Coverage An introduction to Interac Association Business context for the chip initiative Objectives Scope & timeframes Draft requirements identified to date Approach being considered for technology acquisition Near term implications

3 Interac: A Canadian Success Story Resources & cooperation = national network infrastructure 124 members Two core services: – Shared Cash Dispensing (SCD) – Interac Direct Payment (IDP) 325,000 Merchants –with over 460,000 POS terminals 35,000 ABMs In 2001, Interac Direct Payment logged 2.2 billion transactions, a 1000% increase since it was nationally available in 1994.

4 INTERAC Services Have Canada Leading the World 53.4 Canada U.S. Sweden U.K Canada U.S France Belgium Transactions per Inhabitant Source: Bank for International Settlement (end of 1999) ABM UseEFT/POS Use

5 Business context for the chip initiative The Canadian Chip Migration Project (CCMP) has been underway for 18 months, and is intended to enable the successful delivery of EMV-based chip payments infrastructure within Canada To properly support CCMP the Association is defining the common business rules and infrastructure requirements needed to implement Interac Shared Services on chip Chip specifications from the previous chip program (IMVCCP) are no longer current and need updating

6 Objectives The objective of the chip program is to make Interac chip-ready ‘on paper’ if/when a Member decides it would like to move to chip. Deliverables will include: –Business requirements –Operating rules and regulations –Project plans for changes to the Inter-Member Network –Project plans for the implementation of a Certification Authority –Plans for the implementation of a chip certification process –Test plans….

7 Objectives Deliverables will not include : –Development of plans for trials and roll-out –Implementation of changes to Inter-Member Network to accommodate chip –Implementation of a certification process –Implementation of a Certification Authority

8 Scope & timeframes Scope includes: –Creation of technical specifications covering the Interac Shared Services –Stakeholder communications strategy –Opportunities to leverage, where feasible, the chip technologies developed by other card associations Timeframe –Chip ready ‘on paper’ by mid-late 2003 –Implementation decision is separate and involves commitment of resources.

9 Draft requirements identified to date Basic requirement –Replicate existing service functionality (… requires a multi-application chip card in order to address both domestic and international utility) Possible Enhanced features to be included in the specification: –Provide cardholders with access to multiple accounts, and customize account availability for each Interac service –For off-line operations, differentiate risk parameters by account, by Interac service …… or share parameters where it makes sense to do so –Candidate lists presented for selection should be tailored to the specific circumstances of each cardholder –Position Members to offer multi-application (credit/debit) cards, should they so wish

10 Approach being considered for chip technology Interac Association’s intention is to leverage existing chip infrastructures to the extent possible –reduce cost & complexity –shorten development time frames –minimize technology risk Preliminary discussions already held with Visa, MasterCard, and AMEX, …. and with the major card manufacturers

11 Leveraging existing chip technology - evaluation criteria What options are available, and how effective are they What are the operational implications (risk, branding, cost, …) What are the rules and conditions to be imposed Do any of the options present opportunity to enhance existing services

12 Leveraging existing chip technology - ideal capabilities For debit cards –use the application, the data structures, and any expected data values –use selected parts of the application, but allow for additional Interac specific processing routines, data structures, and data values, if required For multi-application cards –use common application, common data structures, common data values –share particular aspects of the application, and perhaps some of its data, but utilise also Interac specific data and processing routines, if required

13 Leveraging existing technologies - preliminary conclusions Basic requirements seem able to be met using existing masks (M-Chip, VSDC) Enhanced features require either multiple instances of the application to be replicated within EEPROM, or development of an Interac-specific mask

14 Near term implications of this approach ApproachPro’sCon’s Use either the M-Chip or the VSDC mask Available today Relatively inexpensive Supports basic requirements Inability to support enhanced features without replication of the application within EEPROM This may present increased risk Develop Interac- specific mask Flexibility to meet all requirements Cost