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Triple DES Dare You

The facts on the struggle to implement the overhaul of the ATM transaction.

October 12, 2003

First there was Y2K, the millennium bug that, despite all of the hype, was resolved with surprisingly little fuss in the ATM world.

Then came the federal government's proposed changes to the ADA (Americans with Disabilities Act), a more vexing concern that will require the ATM industry to make its machines more accessible for all users, chiefly by adding the ability to make them talk.

Although the Department of Justice has yet to sign off with its final guidelines for ATM accessibility, the industry seems well on its way to resolving the ADA issue.

The latest acronym to inspire industry-wide angst is DES: Data Encryption Standard, or more accurately, Triple DES.

What DES is

Developed by an IBM team in the mid 1970s, adopted by the National Institute of Standards and Technology (NIST) in early 1977 and approved by an American National Standards Institute committee (ANSI X3.92) in 1981, DES is an encryption algorithm used to protect sensitive data -- such as PINs.

With DES, a binary number called a key is used to encrypt and decrypt data. The DES algorithm uses a 56-bit key length; Triple DES specifies three rounds of encryption, effectively increasing the key length to 168 bits.

Colette Broadway, technical project manager for Thales e-Security, a provider of Host Security Modules (HSMs), the devices where PIN encryption and de-encryption occur at the host, said that there are 2⁵⁶ or 72 thousand-million-million values for any single DES key.

While that sounds like a lot, Broadway said, advances in computing power have made it possible, at least in theory, to crack DES using a "brute force" attack in which a computer tries every single value until the correct one is found. 

There have been no cases of fraud linked to a breach of DES, a group called the Electronic Frontier Foundation won a "DES cracking" contest in 1998 by breaking a DES key in less than three days using a specially developed computer. Developed for less than $250,000, the DES Cracker computer was powered by a chip capable of processing 88 billion keys per second.

In 1999, a group called Distributed.Net used the DES Cracker and a worldwide network of nearly 100,000 PCs to win a DES cracking contest in 22 hours and 15 minutes. The DES Cracker and PCs combined were testing 245 billion keys per second when the correct key was found.

Cambridge University researchers Michael Bond and Richard Clayton also were able to crack DES in less than a day in 2001.

The industry settled on Triple DES as the most logical alternative to DES, Broadway said, because it can be easily incorporated into existing DES systems and is based on standards and procedures already familiar to most in the ATM business.

Assuming a computer could process 10¹² keys a second, it would take 27 hours to crack single DES, Broadway said. In contrast, it would take 3.2 x 10¹³ years using Triple DES and a double-length key and 3.2 x 10¹⁸ years using a triple-length key. To put that in perspective: the universe is estimated to be 10¹⁰ years old.

Industry reaction

While the United States EFT industry had been quietly discussing alternatives to DES for some time, most seemed shocked when MasterCard adopted Triple DES requirements for its Cirrus ATM and Maestro debit networks in late 2000. A January 2001 MasterCard bulletin informing its members that ATMs must be "Triple DES compliant" by April 1, 2002 triggered a wave of negative reaction.

Hugh Burke, vice president of internal audits for Star Systems, said MasterCard made some incorrect assumptions.

"When MasterCard decided to draw a line in the sand, they didn't do the due diligence to ensure the hardware was available," Burke said. "The original rule said 'compliant,' which we assumed meant actually running Triple DES. No one would ever have been able to comply with that."

While she acknowledged that there had been some confusion over the word "compliant," Carol Jonak, MasterCard's director of debit product management, said MasterCard has taken an undue amount of heat for its implementation schedule.

"It wasn't easy putting pen to paper and coming out with these dates, but it's the responsibility of the network to protect itself," she said.

Earlier discussions on Triple DES had reached an impasse, said Jim Shaffer, a senior product manager at ACI Worldwide, "The vendors wanted banks to commit to spending the money to upgrade, the banks didn't want to spend the money unless they had to, and the card associations didn't want to make a mandate until the vendors had the equipment," he said.

Before MasterCard released its dates, Shaffer said it seemed likely that Triple DES implementation would begin at the host level and migrate downstream. Once the April 1, 2002 deadline was announced, however, the focus shifted to individual ATMs.

"If the issue is mitigating risk, it seems like you would have gotten more bang for the buck by focusing first on those high-volume interchange links," Shaffer said.

Dean Stewart, director of product planning and management for Diebold, said he can see advantages to both approaches. He agreed that focusing on areas with the fewest points of contact first and working down to the most numerous seems logical.

However, he said, ATM owners are the most likely to delay making the needed changes until other upgrades are made to the ATM.

"It reduces the costs for them. The ATM operations director has concerns other than PIN security to address. His priorities may be different than the priorities of the risk management director."

Breathing a little easier

MasterCard attempted to clarify its Triple DES policy in an operations bulletin dated March 29, 2002, two days before the new regulation was to take effect. In that bulletin, it dropped the apparently loaded word "compliant," and replaced it with "capable."

According to the bulletin: "All newly installed ATMs, newly installed merchant terminals that accept PINs, and cardholder-activated terminals must be Triple DES capable. That is, they must be capable of processing triple DES at the point of interaction. 'Newly installed' also includes replaced and relocated ATMs and POI terminals."

The next step

The March 29, 2002 MasterCard bulletin also specified that member and host processor systems must use Triple DES for PIN-based transactions at devices able to run Triple DES by April 1, 2003.

While Star was successfully running some Triple DES transactions by that date, Burke said the network today is still waiting to make arrangements for testing with some vendors, transaction processors and host systems.

"There are some stragglers," he said.

Because of the difficulty in coordinating full regression testing with all of the necessary parties, Star, Pulse and other EFT networks requested and received extensions from MasterCard. With the extensions, the networks now must begin running Triple DES at capable devices by April 1, 2004.

The same networks also received variances on behalf of their members for the date when "all ATMs must be Triple DES compliant," listed in the March 29 MasterCard bulletin as April 1, 2005. The new date for those networks: Dec. 31, 2005.

While Visa largely stayed out of the fray over compliance dates, it did in late 2002 issue a requirement that all newly deployed ATMs (including replacement devices) must support Triple DES by Jan. 1, 2003.

Earlier this summer, a notice appeared on Visa's Web site stating that: "Effective July 1, 2007, all ATMs should support TDES."

Alan Falconer, senior vice president of Paragon Data Services, an information technology and management consulting firm that is working with Pulse, Pacific Capital Bancorp and several other clients on Triple DES compliance and other issues, said it's not surprising that  Visa would "soft pedal" at this point. "Everybody's already three-quarters of the way down the road," he said.

At the same time, Falconer said, Visa's extended date may be a "viable marketing ploy" for early-model ATMs, which some deployers may hesitate to upgrade or replace until a better business case comes along.

Final deadline

By the time MasterCard issued its March 29, 2002 bulletin, most ATM manufacturers had already made hardware changes to their new machines to comply with the guidelines - generally providing a secure encryption device that is integrated into the keyboard.

Most manufacturers are calling it an EPP (Encrypting PIN Pad). This differs from previous generations of ATMs, where encryption devices were often located within the vault and connected to the keyboard via a cable.

A bigger concern for deployers, however, is the large number of machines installed before the March 29 bulletin -  none of which are capable of running Triple DES without upgrades. At minimum, an upgrade would require an EPP and additional software. Many machines will also require a faster processor and more memory.

According to most manufacturers, all of their current models and usually one previous generation will be upgradeable.

Costs will vary. Diebold's Stewart suggested it would cost about $800 to $1,000 to add an EPP (Encryption PIN Pad) to existing Diebold ATMs. Kent Schrock, director of marketing for Fujitsu, said it could cost up to $1,700 to upgrade his company's already-installed Series 8000, 7000AP and 7000 machines with both hardware and software.

MasterCard's Jonak said the 2005 deadline gives ATM owners ample time to eliminate their oldest machines that are not capable of running Triple DES and reduce the number of machines that will require hardware upgrades.

Even without network approval, however, Falconer said there are ways for deployers to continue to use their oldest machines. "I think some folks may take machines that have some real age on them and put them in locations where, say, 80 percent of their transactions are on-us. They might be willing to forgo that 20 percent of acquired transactions to save on the cost of upgrading or replacing those machines for Triple DES."

Despite all of the outcry over the differing dates for compliance, Falconer said he believes networks accomplished their aim.

"I think the number one goal was just to get people started - and that's been accomplished," he said. "The manufacturers and the HSM providers all have solutions. Now it's a matter of getting it done."

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