Physical Cards: The Unexpected Frontier in Digital Security

Adam Lowe, Ph.D, chief product and innovation officer at CompoSecure, hears it all the time from banking executives when the topic is securing payments: “We cannot introduce friction.” But the balancing act is a tough one. Challenge a user too much and they’ll switch to a competitor. Challenge them too little, and the customer’s financial injury may be calamitous.

In this age of digital attacks and global hacks, banks, FinTechs and platforms face a dilemma. One need only look at the size and scope of the AT&T breach to see that hackers have been able to access, co-opt and use all manner of data to power their scams, and perhaps, cobble together synthetic identities. SMS texts are not as secure as they once were, given the fact that imposters can be the ones behind the SMS missive that seeks user confirmation to complete a transaction.

Among the best lines of defense and security, he said, is something that just about everyone has in their possession: a tangible, physical card. And the card, he said, ticks all the boxes of a robust and usable form of identity protection, as the technology has proven simple enough that even his mother feels comfortable using it, and as tap-to-pay has become a feature ingrained in daily financial life.

CompoSecure’s digital security platform, Arculus, streamlines digital authentication processes and secures digital assets, underpinned by the blockchain. CompoSecure, he said as part of the “What’s Next in Payments” halftime report, “essentially invented the metal card,” and now, with the digital Arculus platform, has extended the capabilities of a payment card.

“We’re seeing more customers rolling out our Arculus technology,” he said, “whether it be the wallet technology, and having digital assets alongside a payment card … or whether it’s the authenticate technology, which is for more traditional banks and for FinTechs.”

A Pocket-Sized Cryptography Engine

With enhanced digital security features, he said, the card “essentially becomes a cryptography engine in your pocket.”

The chip that’s embedded in the card, he said, serves as that aforementioned engine. To enhance the digital experience, he said, the company debuted the Arculus Cold Storage Wallet, which is the digital asset hardware wallet, which puts “keys” on the card for any user to store and use those keys for security to support and pay with crypto assets.

In addition, leveraging similar key technology, Arculus Authenticate allows users to tap their cards to authenticate themselves via a passkey that’s stored on those cards. These cards with Arculus Authenticate can also accept payments, so consumers can login, sign and approve payments.

“Instead of being synched to the cloud,” he said, of the data, “where it can be ‘ripped’ out of the cloud by bad actors, your passkeys are safe in your pocket the same way your keys to the front door of your house are safe in your pocket.”

And, he added, “whether it’s signing Visa transactions, or MasterCard, FIDO 2, or whether it’s signing Bitcoin and Ethereum transactions, that cryptography engine is happy … we can serve whatever market segment needs to be served by design, and we can make it all interoperable.”

That interoperability, he said, is a bit like bridging all the railroads back in the 1890s, as a range of different track gauges knit together to make everything work, east to west and vice versa. In this case, the various parties in a transaction using zero trust architecture standards as transactions move along various conduits. According to the U.S. Department of Commerce, zero trust architecture is the term for “an evolving set of cybersecurity paradigms that move defenses from static, network-based perimeters to focus on users, assets and resources.” It assumes no implicit trust based on physical or network location.

“We’re ‘meeting’ blockchain and digital assets with traditional Web 2 payments,” Lowe said.

As he told PYMNTS in the voice of a FinTech or bank, “in this compliant way, while having a good user experience … I’m going to have a better reputation, I will acquire more consumers and retain them too.  And that brings value.”