What Is a Cryptogram in a Credit Card?

A credit card cryptogram is a fundamental security feature in modern payment systems, particularly with chip (EMV) cards. This advanced security measure helps enhance transaction safety and combats financial fraud. It functions as a dynamic, encrypted digital signature unique to each transaction. The cryptogram authenticates the card and transaction, providing a robust defense against unauthorized use and data compromise.

What is a Credit Card Cryptogram?

A credit card cryptogram is a unique, single-use, encrypted code produced by the EMV chip in a credit card for each transaction. Its primary purpose is to authenticate both the physical card and the specific transaction. Unlike static data on traditional magnetic stripe cards, which can be easily copied, a cryptogram is dynamic, changing with every transaction. This makes it challenging for unauthorized individuals to create counterfeit cards or reuse stolen transaction data. The cryptogram acts as a digital fingerprint, confirming the card’s authenticity to the payment network and the issuing bank.

How Cryptograms Secure Transactions

Cryptograms secure transactions when an EMV chip card is inserted into a compatible point-of-sale terminal. The card’s embedded chip communicates with the terminal to initiate the transaction authentication process. The chip generates a unique cryptogram using secret cryptographic keys stored within the card, along with transaction-specific data elements. These data elements include the transaction amount, date, time, and the merchant’s identification. This unique, one-time cryptogram is sent with other transaction details to the issuing bank for verification.

The issuing bank receives the cryptogram and performs a validation check. If the cryptogram matches the bank’s expected value, it confirms the card’s authenticity and the integrity of the transaction data, leading to authorization. This dynamic, one-time use mechanism prevents common fraud tactics such as skimming, where card data is illegally copied, and replay attacks, where stolen transaction data is reused. Since each cryptogram is unique to a single transaction, intercepting or stealing it does not enable fraudsters to create new fraudulent transactions. Even if data is compromised, it becomes useless for subsequent unauthorized activities.

Components and Functions of a Cryptogram

The Authorization Request Cryptogram (ARQC) is the primary cryptogram generated by the card during an online transaction to request authorization from the issuing bank. This ARQC contains encrypted data elements that the bank uses to verify the transaction’s legitimacy. An element contributing to the ARQC’s uniqueness and security is the Application Transaction Counter (ATC). The ATC is a counter maintained by the EMV chip, which increments with each transaction, ensuring every cryptogram generated is distinct.

The incrementing ATC helps prevent replay attacks, as the issuing bank can detect and decline transactions that present a previously used or out-of-sequence ATC value. Another data element factored into the cryptogram’s generation is the Unpredictable Number (UN). This random value is generated by the point-of-sale terminal and passed to the card’s chip, enhancing the uniqueness and variability of each cryptogram. The issuing bank validates the ARQC by performing cryptographic calculations using the received data, including the ATC and UN, and comparing the result with the cryptogram sent by the card. This multi-layered verification process ensures the authenticity of the transaction and the card, providing a robust defense against fraud.