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OneSMART™

MasterCard ToolkitEvolve Your Payments Business Today and Tomorrow

More Smart Solutions

OneSMART™MasterCard�

�

TABLE OF CONTENTS01 Overview

05 Migrating Payments to Chip:Building the EMV InfrastructureM/Chip Payment Solutions:

M/Chip Credit M/Chip Debit

M/Chip Services:Getting Started

Education and TrainingSupport for Your Business Strategy and Planning Support for Your Chip Business Case

Implementation and Technical SupportProject Management Vendor and Industry SupportFunctional ApprovalQuality AssuranceSecurity Evaluation

13 Growing Your Business with Chip:Leveraging the EMV InfrastructureOneSMART Packages:

OneSMART Pre-AuthorizedOneSMART AuthenticationOneSMART WebOneSMART RetailOneSMART PayPass

OneSMART Deployment:OneSMART Marketing SupportOneSMART ClubsOneSMART PilotsOneSMART Testing and ApprovalOneSMART Vendors

25 Enabling Standards, Specifications and Platforms:EMVChip Authentication ProgramMasterCard Open Data StorageMasterCard PayPassMULTOS

29 Your OneSMART Move

No card is more

accepted than the

MasterCard® card,

which can now be

used at over 22

million locations

around the globe.

OVERVIEW

01

Partnering with MasterCard

Around the globe, the market opportunity is unmistakable. Smart cardsare poised to bring unprecedented security, convenience, and value toconsumers and businesses worldwide. Forward-thinking banks are harnessing the power of chip today to offer new, better businesspropositions that sharply differentiate their offerings to cardholders.

At MasterCard, we approach chip migration the same way we approach

the rest of our business: with the hands-on support and total customer

focus that distinguish MasterCard in the marketplace. We are not interested

in chip technology solely for its technical merits. It's the technology’s

potential for stronger security, wider acceptance, deeper relationships, and

new marketing programs that makes it compelling.

Through the global OneSMART™ MasterCard� program, MasterCard will

help you to prosper in this new era. We invite you to work with us to

achieve the full potential of smart cards now and in the years ahead.

When you partner with MasterCard, you gain access to our complete

range of chip products and platforms, our best-in-class migration services,

and the smart card professionals in our global Chip Center of Excellence.

MasterCard’s team of specialists will work with your institution before,

during, and after implementation to ensure your successful migration to

chip technology and to help maximize the growth and profitability of

your card business.

SECTION I: OVERVIEW

�

02

Europe 1/1/2005 1/7/2000

Asia/Pacific 1/1/2006 1/1/2003

Latin America/ 1/1/2005 1/1/2005Caribbean

South Asia, 1/1/2006 1/4/2003Middle East Africa

1/1/2005 for South Africa

Liability ShiftMandate

InterchangeIncentives

Chip Migration Plans by Region

The Future Has Arrived

“I don’t worry about the future,” Albert Einstein once said. “It comes soon enough.”

And, so it has for the payments industry. The chip-based smart card is in wide use allover the world. As of June 2004, over 187 million MasterCard®-branded cards carried achip – and more than 71 million of these were compliant with the global EMV (Europay,MasterCard, and Visa) standard for smart card interoperability. MasterCard is currentlyworking with customers on hundreds of separate chip deployments worldwide.

Recognizing the unique business-building capabilities of chip, four of MasterCard’s fiveregional boards have adopted important plans to encourage migration to EMV chip.These include intra-regional policies that shift liability for transaction fraud losses to theparty that is not EMV chip–enabled, and interchange incentives to help achieve a critical mass of smart cards. Interchange incentives have been in place for some time,and the first two of these liability shifts go into effect January 1, 2005, in Europe andLatin America; the others follow shortly thereafter.

OneSMART ProgramThe global migration to EMV chip is perhaps themost important change to the card payments industry since its inception. A whole new technical and commercial infrastructure is beingbuilt—not just smart cards, but also terminals, networks, systems, contractual agreementsbetween commercial partners, standards, businessrules, vendor communities, and, of course, consumer awareness.

The OneSMART MasterCard program gives youeverything you need to migrate to chip and evolveyour business on your own terms. The most comprehensive and customizable smart card delivery program available, OneSMART MasterCardprovides a complete range of products, services andtools to help you adapt to—and capitalize on—thechanges brought about by chip technology.

The first focus of OneSMART is on building thenew EMV infrastructure. For over a decade,MasterCard has been working with customers andvendors to design and roll out the most securepayments infrastructure ever seen. Across theglobe, we’re working with customers to helpthem capitalize on their investment in EMV chiptechnology to build market share, identify new revenue streams and gain competitive advantage.Our global chip payment solutions are designed tohelp you run your existing card businesses moreprofitably, at lower cost and with less risk.

To deploy these solutions you will need toupgrade your core networks and systems, whilepreserving full interoperability with the currentmagnetic stripe infrastructure. At MasterCard, wehave the know-how and resources to help youthrough each stage of the migration process.Mindful of your bottom line, we have designedour chip payment platform to be flexible. As your experience with chip evolves, new product features and capabilities can be added in a relativelylow-cost, technically straight-forward manner.

Whatever your strategy, MasterCard isready to help put the power of smart cardsto work for you–on your terms, and onyour time frame. This toolkit is designed tointroduce you to our complete range ofproducts and services, and illustrate howthey work together to provide best-in-class support for your chip program.

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More Smart SolutionsMasterCard®

04

OneSMART MasterCard:A Winning Strategy for GrowthAll over the world, MasterCard is helping customers leverage their investment in EMVchip to build market share, identify new revenue streams, and gain competitive advantage. Our added-value OneSMART packages are designed to help our customersgrow their business through improved:

• Customer acquisition by differentiating thebasic card product with highly targeted addedvalue propositions

• Customer retention by strengthening cardholder loyalty with personal preferences andpersonal data stored on the chip

• Card activation and usage through sophisticated multi-merchant loyalty programs or chip-level security for non-face-to-face transactions

• Innovation by enabling payment over new delivery channels and providing new card enhancements, such as e-coupons and e-tickets

We work with you to define your unique businessrequirements and goals, and design a custom-tailored smart card strategy that meets your needs. At every step, we give you choices so you adopt only those services that fit with your strategy. Our goal is to make OneSMART MasterCard your clear answer to the opportunities and challengesof chip migration.

00

Our migration

process is logical,

comprehensive,

and based on years

of experience in

leading chip

migration programs

all over the world.

MIGRATION

MasterCard’s end-to-end approach to smart cardsis designed to bring about a low risk, highly efficient transition to chip technology. Our processis logical, comprehensive, and based on years ofexperience in leading chip migration programs all over the world. We start with a careful assessment of your business goals, and we stayinvolved at every stage of the chip migration processand afterward to help you meet those goals.

The cornerstone of the new chip payments infrastructure is the global EMV standard for creditand debit payments, jointly developed by Europay,MasterCard and Visa in 1996. The latest versionof the standard, EMV 2000, is a powerful, richand comprehensive definition of chip payment functionality.

MasterCard M/Chip is our powerful EMV-compliantapplication for placing global debit and creditfunctionality on a smart card chip. With M/Chip,you can issue globally interoperable MasterCard-,Maestro�-, and Cirrus�-branded smart cards. Ourlatest version, M/Chip 4, is fully compliant with EMV2000 and is, we believe, simply the best in the business (see box).

But migration to EMV chip involves far more than just technology, and our M/Chip program isfar more than just a specification for a payment application. Our customers need end-to-end solutions to support distinct business propositionsand a comprehensive range of support services foreach stage of the process of migration to EMV chip.

MasterCard’s M/Chip–based payment solutionsand services are designed to meet that need, andto do it in a way which works the first time, everytime, and with an eye toward future growth.

05

SECTION 2: MIGRATING PAYMENTS TO

M/Chip Core Benefits: Better Security, Lower Costs and More Control

• A Higher Level of Security- The chip itself is much more difficult

to counterfeit.- The cardholder is normally authenticated

at the POS by a PIN, which is more secure than a handwritten signature.

- Sophisticated processing within the chip allows data to be protected and for more checks on the authenticity of the card and cardholder to be carried out.

• Reduced Transaction Costs- Because more processing is carried out

off-line within the chip, telecommunicationsand other costs are lower for both issuers and acquirers.

- Smoother peak processing loads and streamlined operations also reduce costs.

• More Control- The processing power of the chip means

that issuers can significantly improve risk management by tailoring authorization options to individual and merchant profiles.

At MasterCard, we approach chip

migration the same way we approach

the rest of our business: with the

hands-on support and total customer

focus that distinguish MasterCard in

the market place.

M/Chip PaymentSolutionsSince M/Chip delivers both global credit and debitfunctionality in one integrated solution, you canuse the same M/Chip application to convert bothtypes of card portfolios. Each payment type hasits own unique characteristics, of course, andM/Chip carries unique benefits for each area ofyour business. With this in mind, let’s look at thetwo different types of M/Chip payment solutions:

• M/Chip Credit

• M/Chip Debit

M/Chip Credit

M/Chip Credit gives issuers across the globe powerful new capabilities to improve risk management and reduce fraud as well as fraudadministration expenses. M/Chip Credit allows youto exercise much more control over credit risk byenabling you to establish parameters on the chipthat govern the transaction authorization process.

06

CHIP: Building the EMV Infrastructure

You might program the card, for instance, torequire online authorization based on a specifictransaction amount, transaction frequency, cumulative payment limit, or some combination ofall three. Such parameters can be customized tothe cardholder’s risk profile and changed onlinevia scripting commands even after the card hasbeen issued.

The ability to monitor and continually changeindividual cardholder risk profiles means that you can manage credit risk in a much moresophisticated way. We’ll work with you to helptailor the risk management capabilities of M/ChipCredit to the needs of your portfolio and localmarket and help you maximize the benefits of this powerful, new risk management tool.

In many countries today, credit payments areauthenticated by a written signature on the salesreceipt. Migration to chip will therefore involve a change in cardholder and merchant behavior as PIN authentication become becomes widespread.For example, the UK is currently undergoing anationwide migration to “Chip and PIN”. The endresult? More automation for merchants and amore secure, streamlined payment experience forcardholders. The more automated nature of chippayment processing should also result in lowercosts due to reduced labor-intensive exceptionprocessing of, for example, cardholder queries,referrals, retrievals, and chargebacks. MasterCardis ready to help you take maximum advantage of these significant opportunities.

M/Chip Debit

M/Chip Debit brings enhanced security to debitcard transactions and new opportunities for offline processing. That means you can offerdebit cards to a broader range of consumers at awider range of merchant outlets.

M/Chip Debit lets you give cardholders full accessto their checking account and to debit paymentfunctionality at any branded chip terminal world-wide. This powerful solution lets you migrateyour portfolio as cost effectively as possible andopens up opportunities to significantly reducecosts by:

• Authorizing more transactions offline

• Smoothing peak processing loads by

judiciously relaxing online authorization

rules during heavy transaction periods

(e.g., holiday shopping season) and

thereby reducing the processing capacity

requirements of central systems

• Automating the transaction process and

thus helping to reduce the cost of a wide

range of labor-intensive activities, such as

processing chargebacks and referrals

• Reduced potential for counterfeit fraud,

especially on ATM07

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

Credit and Debit on the same card?It's possible with MasterCard M/Chip*

M/Chip ServicesAt MasterCard, we believe that providing excellentpayment solutions is not enough. We are committed to helping you understand how to usethese solutions to your maximum advantage. We offer the customized support you need to see the big picture and map out the many steps,large and small, required for moving your ownportfolio to chip. Through our comprehensivearray of M/Chip services, you gain support to guide you through all essential phases of yourchip migration program.

GETTING STARTED

Education and TrainingOur process begins by providing resources to help you gain insights about the benefits chiptechnology can bring to your payments business.MasterCard offers a variety of workshops andplanning tools for executives involved in newproduct and business development, marketing,and technology. Intensive one- to three-day courses cover all topics related to chip migration—from key drivers, business rationale and basic prin-ciples, to POS terminal considerations and end-to-end chip transaction flow overview. We tailor ourworkshops to your needs and market context—allowing you to develop chip expertise in areaswhere it will be most useful.

Support for Your Business Strategy andPlanningWhen you decide to move forward with chipmigration, we help you define your bank’s strategy by asking the right questions— questions such as:

08

A CHOICE OF CARD PROFILES:MasterCard offers you two versions of theM/Chip application:

1) M/Chip Lite – the streamlined version of M/Chip 4. M/Chip Lite is designed to becost-effective and provide a smooth program start-up.

2) M/Chip Select – a more sophisticated, feature-rich program. M/Chip Select builds on M/Chip Lite by adding public key encryption facilities for security functions and Dynamic Data Authenticationas defined in EMV. As a result, it offersgreater protection against card fraud andallows you to introduce a variety of value-added features.

Both options offer an easy migration path to chip. And both are available on MULTOSTM,Java CardTM, and proprietary operating systems. By using a common specificationsource for both versions, MasterCard lets youupgrade from one version to another seamlessly, with minimal impact on back-office authorization and infrastructure.

* Subject to MasterCard regional review and approval.

• What are the business drivers and objectives behind the migration?

• Which products are to be migrated first?

• Which customer segments should be given priority?

• How will chip technology impact the organization?

• How can I speed up my deployment?

• How will I use chip to generate more business?

At this preliminary stage of the process, we alsoconduct an interactive analysis to help you determine your underlying business objectives, as well as a review of your current systems and procedures. As part of this work, we will alsoreview the impact of chip on your organization’ssystems and procedures.

At the end of this analysis, which typically takessix to eight weeks (including ten to fifteen daysof MasterCard dedicated time) we provide a clearand detailed explanation of how the project will proceed.

Support for Your Chip Business Case

In our experience, every bank has a unique business case for chip. MasterCard applies all ofour expertise to help you get the most out of yourmigration to chip. We conduct a comprehensivecost/benefit analysis to identify and quantify business opportunities, and we share with youthe demonstrated ways chip technology is effectiveboth in delivering core EMV benefits and alsoadded value applications.

Our chip business case scenarios help you understand the key factors affecting the businessimpacts of chip technology to maximum businessadvantage (for example, factors determining chipcosts, the impact on card personalization, the newsecure functions that can reduce fraud, or the ability to control payment risk). We offer a trainingworkshop to help you develop your business casebased on your own program assumptions. We provide case studies and deliver specialized consulting services to help you construct businessmodels that evaluate revenue and cost estimatesunder different likely scenarios.

IMPLEMENTATION AND TECHNICAL SUPPORT

When you are ready to begin the implementationphase of your migration, you’ll have our supportevery step of the way. Over the years, we havebuilt a comprehensive set of chip implementationservices, tools and documentation to support ourcustomers. These services include project management, information to help you choose the right vendor, and a customized plan for your program launch. A dedicated MasterCard projectmanager will ensure that you have all theresources you need throughout the migrationperiod and beyond.

09

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

10

When you are

ready to begin the

implementation

phase of your

migration, you'll

have our support

every step of the way.

Project Management

The key to successful chip implementation is creation of a thorough, yet realistic project plan.MasterCard has considerable chip project management experience around the world, andcan work with you to convert your business andtechnical requirements into an achievable plan. As you weigh the required changes to your cards,terminals, host systems, card personalizationprocess, risk management, key management andexception processing, MasterCard will support youin your project delivery, possibly including the relationship with your suppliers.

To support a typical nine-month project, we offera fixed package of 20 days of project-managementservices that includes assistance on the kickoffmeeting, requirements analysis, solution design,project plan delivery, establishment of a relationship with suppliers, project coordination,tracking and reporting.

Vendor and Industry Support

Successful chip migration also means selectingthe vendors that are right for your particularneeds and then working closely with themthroughout the migration process and beyond.MasterCard works with third party companies allover the world, through our global Chip Centreof Excellence and the MasterCard VendorProgram (MVP), to secure a current and futuresupply of competitive products and services thatmeet our global requirements for you, our customers. At the same time, we work to secure transactioninteroperability and brand integrity at every step.

Over the years, MasterCard has forged close relationships with the leading players in the chipworld, and actively contributes to all major associations and forums. Our in-depth understanding both of the state of the art todayand what is over the horizon positions us to giveyou the advice you need when migrating to chip.

Functional Approval

When deploying chip technology it is important to make certain that the solution under consideration has been fully tested and approved.To that end, MasterCard offers a series of services to ensure that the vendors you work with deploy terminals and equipment that workexactly as intended. These approval services, undertaken by MasterCard and your vendor partners, involve testing cards, terminals andother equipment to ensure that they meet ourglobal requirements.

For Acquirers:

• Terminal Specifications Analysis• Terminal Approval Level 2 (testing and approval)• EVAL EMV Level 2 Test Tool

For Issuers:

• M/Chip Card Approval• MasterCard Electronic Card Personalization

Validation – ECAP

11

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

12

Quality Assurance

MasterCard’s quality-assurance processes are critically important to the chip migration process,and ensure that vendors produce reliable cardproducts with global interoperability. These programs include product testing throughout atransaction life cycle to achieve high quality.

• Card QualityOur Card Quality Management (CQM) programensures that cards are produced in accordancewith MasterCard-approved production specifications. The CQM program assesseshardware interoperability, product robustnessand reliability, production stability, and hardware configuration management. CQMensures the smooth introduction of smart cardsin live environments. The program minimizescard replacements due to physical weaknessesin the chip, module, or the entire card. We alsooffer a card personalization validation tool, theMasterCard Electronic Card PersonalizationValidation tool (ECAP). ECAP tests personalizedsmart cards with the core M/Chip applicationand ensures that the cards are in compliancewith EMV and M/Chip specifications.

• Terminal QualityOur Terminal Quality Management (TQM) program helps MasterCard acquirers ascertainthat terminals they deliver are reliable and consistent with the interface module (IFM) sample as approved by EMVCo. The TQMprocess focuses on the smart card interface ofthe terminal hardware. MasterCard’s ElectronicValidation Tool (EVAL) addresses functionalneeds of terminal and smart card manufacturersand application software developers.MasterCard offers EVAL to these vendors sothat they can obtain EMVCo approval through tests performed in an EMVCo accredited laboratory.

Security Evaluation

Our Compliance Assessment and Security Testing(CAST) provides valuable and practical informationrelating to the general security performance characteristics and the “suitability of use” ofsmart cards, smart card–related products, and ICchip–based tokens. CAST helps ensure that smartcard products and their components have arobust security foundation. All smart card issuersare required to participate in the program for chipimplementations on the MasterCard, Maestro,and Cirrus brands.

See Toolkit CD-ROM for more detailson our M/Chip Services.

See the “Member Publications” section of www.mastercardonline.com for our detailed chip documentation.

Our core M/Chip platform has been

designed from the outset to support a full range

of value-added services and solutions.

GROWTH

At MasterCard, we’ve always taken care to lookbeyond the short-term challenge of building theEMV infrastructure to ask where chip is headingin the longer term, and what future benefits itwill bring our customers. That’s why ourOneSMART program includes a range of added-value propositions which go beyond the coreEMV benefits of migration.

Your investment in M/Chip-based payment solutions and services gives you the opportunity

to run your card business more efficiently and with reduced risk. You can build on this investmentto launch new added-value business propositionsthat really make a difference to your bottom line.MasterCard’s family of OneSMART packages andservices are designed to help you do just that. The built-in power and flexibility of M/Chip letsyou grow your business through new products,new markets and new delivery channels.

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SECTION III: GROWING YOUR BUSINESS

All MasterCard OneSMART packages aredesigned to leverage your chip investment to thefullest. In each case, we have bundled together allthe components—card applications, card readers,system software, and business processes—necessaryto exploit an important business opportunity.Some packages are off-the-shelf solutionsfocused on one specific capability. Others can beused to support a range of business propositions.All packages are ready for deployment now, andwe’ll work with you to pilot them and to finetune their capabilities to your specific portfolioneeds. When you are ready for a full roll out, we’llprovide you with the marketing resources and end-to-end support that distinguishes our OneSMARTprogram of payment solutions and services.

Our OneSMART added-value packages canhelp you to expand:

• The scope of card-based payments into potential new markets and new acceptance channels

• The reach of your card programs by using chip to integrate the physical and virtualworlds—in effect extending the EMV infrastructure into the home or workplace

• The range of services offered to cardholdersand merchants to include new conveniences such as loyalty programtracking, data storage, and e-ticketingcapabilities

14

WITH CHIP: Leveraging the EMV Infrastructure

Chip Loyalty

MasterCard Open Data Storage(MODS)

MasterCardM/Chip

MasterCard Open Data Storage(MODS)

Chip AuthenticationProgram

MasterCardM/Chip

Chip AuthenticationProgram

MasterCardPayPass

MasterCardM/Chip

MasterCard M/Chip

MasterCard M/Chip

OneSMARTPre-Authorized

OneSMARTAuthentication

OneSMARTWeb

OneSMARTRetail

OneSMARTPayPass

OneSMART Pre-AuthorizedExpanding the Scope of Card Payments

OneSMART Pre-Authorized is a flexible productthat allows issuers to achieve low-risk, profitablegrowth by exploiting potential new markets andnew acceptance environments.

Here’s how it works: Cardholders agree to designatesome amount of funds in a “shadow account” thatcan be used only for pre-authorized payments. Thepre-authorized payments are then authorized securely offline, minimizing processing costs. Acounter on the chip keeps track of the cumulativevalue of pre-authorized payments, and when thepre-authorized funds have been used up, the cardholder can replenish them through a methoddefined by the issuer (e.g., via an ATM, a monthlysalary payment, or a government benefit payment).

Since OneSMART Pre-Authorized is low-risk, youcan use it to develop new sub-prime markets, suchas people with no previous banking history. Then,as the cardholder's risk profile improves, you canupgrade them to a standard credit or debit card.Since all OneSMART packages are based on theM/Chip application, you can accomplish thisupgrade via a simple scripting command so there’sno need to reissue the card.

With its unique, low-risk, offline authorization capability, OneSMART Pre-Authorized is the payment solution of choice for regions with poortelecommunication infrastructures or for use atunattended, offline terminals. And, since processing costs are minimized, it is also an attractive solution for small payments.

Given these advantages, it is not surprising thatOneSMART Pre-Authorized is attracting greatinterest from issuers all over the world.

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Broadening the customer base:OneSMART Pre-Authorized makes it possible to market to entirely new customer segments, including:

• Limited functionality cardholders: With OneSMART Pre-Authorized, cardholders who are currently approved only for on-us or ATM-only withdrawals can have full service debit capability.

• Non-cardholding bank customers: It used to be too expensive—and too risky—to offer cardaccess services to some customers. With OneSMART Pre-Authorized, you can offer more consumers better access to funds.

• Unbanked prospects: With its extremely low transaction and account-servicing costs, OneSMART Pre-Authorized gives you an economical way to do business with consumers who never before have had a banking relationship. This is an especially important consideration for governments that may wish to expand banking opportunities to disadvantaged citizens.

• Youth markets: OneSMART Pre-Authorized is safe enough to issue to young people as their first payment card. You can even arrange for parents to have control of replenishing the pre-authorized account.

• Cardholders who value control: All over the world, there is an important segment of consumers who are concerned about debt management and who would welcome the self-imposed discipline of a prepaid product. Many such consumers are already familiar with thepre-authorized concept through pay-as-you-go mobile phone contracts. These consumers represent a promising segment for OneSMART Pre-Authorized, especially if the card is enhanced with a reader so that they can check their balance before payment.

OneSMART AuthenticationExpanding the Reach of the EMV Infrastructure

OneSMART Authentication gives cardholderspeace of mind that the payments they makeonline will be as secure as chip-based paymentsat the POS. This solution is aimed primarily atsecurity-conscious, technology-aware consumers—an important and growing segment.

OneSMART Authentication enables secure payments in both the physical and virtual worlds,using either MasterCard or Maestro cards. Thecardholder inserts the card in a handheld cardreader and enters a PIN on the reader’s keypad.The chip checks the PIN and uses it to generate aone-time password for highly secure shoppingover the Internet. The password is entered in the

appropriate field on the merchant’s checkoutpage and is passed back to the issuer for authentication using the MasterCard®

SecureCode™ data transport infrastructure.

OneSMART Authentication can be used to secureremote banking transactions and even paymentsand banking via the telephone. Since OneSMARTAuthentication generates one-time passwords, it is not susceptible to “phishing” attacks. Andsince the PIN is entered using a separate reader, it cannot be intercepted. By using the same,strong, PIN-based authentication method forremote banking and payments, OneSMARTAuthentication expands the reach of the highlysecure EMV infrastructure.

OneSMART Authentication can also be used withreaders connected to, or embedded within, anydevice—PC, TV, or mobile phone.

17

OneSMART WebExpanding the Range of Services Offered

Like OneSMART Authentication, OneSMART Web appeals strongly to the growing number ofconsumers who have concerns about Internetsecurity. We designed this solution to help youtarget an important market segment of achievement-oriented Internet users.

MasterCard research indicates that many consumers are interested in a powerful, feature-rich smart card—one that they can control andpersonalize as they see fit. In one study, 70 percent of respondents said they would “definitely”or “probably” consider applying for such a card in the future. These consumers value the ability tostore their most valuable personal data on a highly secure and portable smart card (which canbe backed up), and are reassured when PIN entry takes place on a reader separate from thePC keyboard.

OneSMART Web uses the MasterCard Open DataStorage (MODS) specification to enable cardholdersto store personal data, such as names, addresses,identification numbers, URLs and passwords,securely on their smart cards. A card reader con-nected to a PC forms part of the package, and isused to input and retrieve this data.

A web-based PC application then uses this data tomake web browsing and e-commerce simpler, byautomatically logging on to the cardholder’sfavorite websites and providing automatic form-filling of billing and delivery details. OneSMART Web also uses chip authentication to support online cardholder authentication for e-payments and e-banking, and provides a log of recent transactions.

OneSMART Web is available as an off-the-shelfpackage. Yet we have designed this powerfulsolution so that you can also use it as a platformto customize and deliver a wide range of added-value applications for your cardholders, such asloyalty, co-branding or affinity programs, e-coupons and e-ticketing.

For example, by letting your cardholders storepurchase information, coupons, and loyalty program details on the chip, you gain the capability to create exciting cross-channel marketing opportunities with retail partners.Retailers can create frequent-shopper discountsand other programs based on information abouttheir customers’ shopping habits online andoffline. The capability to securely store and readilyretrieve valuable consumer information makesOneSMART Web a powerful tool for generatingnew business and forging stronger relationshipswith your cardholder and/or merchant base.

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19

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

OneSMART RetailExtending the Power of Chip at the Merchant Counter

OneSMART Retail uses cardholder data stored onthe chip to deliver an enhanced customer experience at the Point of Sale (POS). OneSMARTRetail lets banks and their merchant partners manage loyalty programs and customized offersthrough EMV-credit or debit POS transactions.This solution, which does not require the cardholder to have a personal card reader or PCsoftware, can also help you retain cardholders in existing co-brand and affinity programs. Withits ease of use, OneSMART Retail is designed tobe offered as a mass market solution.

OneSMART Retail uses MasterCard Open DataStorage (MODS) to provide a secure and convenientdata storage platform for loyalty solutions, eitherproprietary, or supplied by vendors. Data relatingto bonus points, coupons, punch cards, cash-backfeatures and special events can be securely managed,and conveniently accessed, via the standardizedMODS Application Programming Interface (API).OneSMART Retail also supports secure storage ofcardholder data relating to preferences, hobbies orinterests – data merchants can use to offer customizedspecial offers or marketing messages at the POS.The data can be captured on your payment cardapplication and updated by cardholders via anATM, branch terminal or in-store kiosk.

As more and more private label cards are convertedto branded bank cards, OneSMART Retail deliversa range of strong benefits and new opportunities forstrengthening the overall card proposition. By converting to a MasterCard or Maestro card withOneSMART Retail, cardholders benefit from an

expanded acceptance network of 22 million merchantoutlets worldwide, as well as the compelling newloyalty and customized features you can offer.

In addition to offering loyalty bonuses, merchantscan use OneSMART Retail to generate instant promotional offers and messages at the point ofsale, based on and driven by the cardholder preference data stored on the card.

OneSMART Retail is the ideal platform for enhancing co-brand and affinity programs withthe power of smart card technology. Partner loyaltyprograms, e-ticketing, e-couponing and muchmore can be loaded onto the card, setting yourco-brand programs apart from the competition.

Chip-based loyalty programs offer several potentially important advantageover programs involving magnetic stripecards such as:

• Real-time interaction with the customer

at the point of sale, including instant

redemption of bonus coupons

• Fewer costly online connections from the

merchant terminal to a central server

• Personalization of the rewards program

to the characteristics, preferences and

purchasing history of the individual

cardholder

• Greater cardholder convenience,

lower costs and less fraud through

fewer paper-based bonus redemptions

• Support for more sophisticated

programs involving multiple merchants

20

OneSMART Retail is the

ideal platform for

enhancing co-brand

and affinity programs

with the power of

smart card technology.

OneSMART Retail is the

ideal platform for

enhancing co-brand

and affinity programs

with the power of

smart card technology.

OneSMART PayPassExtending the Convenience and Simplicity of Card Payments

OneSMART PayPass combines the power andsecurity of smart cards with the speed and convenience of contactless payment. Consumerssimply tap or wave their payment card on a specially equipped PayPass reader that then transmits payment details wirelessly, eliminatingthe need to insert the card into a reader.OneSMART PayPass can be used to enhance anyMasterCard card—credit, debit, or prepaid—byadding a contactless interface to the contact chip in addition to the magnetic stripe.

MasterCard conducted U.S. consumer research thatfound that 63 percent of those surveyed would “definitely” or “probably” use PayPass if theirbank offered it. Respondents perceived PayPass as “innovative” and “fun to use,” and an enhancementthat “would make shopping less of a hassle.”

You can use this innovative payment solution toimprove cardholder value. PayPass is the idealpayment solution to replace cash in environmentswhere speed is essential, such as quick-servicerestaurants, supermarkets, cinemas, mass transitprograms, and parking lots.

PayPass transactions can be authorized online or offline, and OneSMART PayPass features therisk-management capabilities of all MasterCardM/Chip payment products. As such, OneSMARTPayPass fully leverages the existing payment infrastructure and EMV standards, combiningthem with the convenience and speed of contactless payments.

For consumers, OneSMART PayPass:

• Saves valuable time by enabling “tap and

go” payment

• Represents “the simpler way to pay” for

everyday purchases

• Is secure, since the cardholder never lets go

of the card during the brief transaction

For merchants, OneSMART PayPass:

• Provides an innovative new payment

method that works well in “quick pay”

environments

• Offers the potential to attract new

customers and increase their loyalty

• Uses card authentication methods that help

provide protection against counterfeit

transactions

For issuers, OneSMART PayPass providesopportunities to:

• Increase revenues by attracting payments

away from cash

• Help acquire new cardholders

• Open new acceptance opportunities for

“quick pay” environments

• Increase card activation and usage

21

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

See Toolkit CD-ROM for more detailson our OneSmart packages.

See the “Member Publications” section of www.mastercardonline.com for our detailed chip documentation.

22

By delivering better and simpler ways

to pay, MasterCard enables our issuers,

acquirers, processors and merchants

to offer cardholders unprecedented

speed, convenience and flexibility.

OneSMART DeploymentOneSMART Marketing Support

Turnkey, production-ready card artwork.Innovative consumer research. Marketingsupport to help you reach your target customers. And, positive news headlines thatmake your financial institution stand out.

These are just some of the dynamic OneSMARTassets we can provide to help ensure that yourcard launch will be a success. Since every issuer’smarketing needs are different, we offer an array ofcustomizable resources, including:

• Branding guidelines

• Card design options

• Case studies

• Consumer research

• Direct mail inserts

• Global and regional media relations

• Proprietary marketing consulting services through MasterCard Advisors

• Trade advertising

• Web content and links to your institution’s website

23

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

24

OneSMART Clubs

Today, the nature and pace of EMV migration isvery much driven by local market considerations.MasterCard OneSMART Clubs provide flexiblesupport to regional communities of issuers whowish to introduce chip in a coordinated and cost-effective fashion. OneSMART Clubs bringtogether issuers, acquirers, merchants and vendorsto leverage joint investments in infrastructure,marketing and research.

Working with MasterCard, club members addressvarious shared issues related to chip migration intheir local market. The clubs can be used to generatelocal marketing support, best practices, consumerresearch and customized support for OneSMARTpackage pilot projects. Pioneered in the Asia Pacificregion, OneSMART Clubs are now active in Taiwan,Malaysia, New Zealand, Central and EasternEurope, and South Africa. Additional clubs are nowbeing planned elsewhere as well.

OneSMART Pilots

When a new chip-based payment solution is intro-duced into a market for the first time, MasterCardmay work with issuers to sponsor OneSMART Pilotprograms. In addition to demonstrating the busi-ness benefits of OneSMART payment solutions,pilots provide valuable real-world information forus that we can then use to the advantage of allour issuers. To learn more about MasterCard’songoing OneSMART pilot programs, and how youmight benefit from them, please contact yourMasterCard relationship manager, or contact us atchip_help@mastercard.com.

OneSMART Testing and Approval

Just as MasterCard has adopted a range of services to certify the quality and security aspectsof our M/Chip programs, we have also put inplace a range of similar certification processes forour value-added chip standards, specifications and platforms, such as MasterCard Open DataStorage, our Chip Authentication Program, andPayPass M/Chip. More information on these standards is included in the following section ofthis Toolkit.

OneSMART Vendors

Today, a range of leading vendors supply integrated OneSMART packages, and the chipstandards, specifications and platforms underlyingthem, to MasterCard customers worldwide.MasterCard works closely with the vendor community to ensure that their solutions meet the stringent requirements we have set for ourOneSMART packages. By ensuring the highestquality components for our customers,MasterCard can help ensure that your OneSMARTprogram is successful from the start.

Over the years, MasterCard has

worked with various industry

players to develop robust standards

guiding the interoperability and

performance of chip-based payment

solutions—standards that fully

support your evolving needs.

Over the years, MasterCard has

worked with various industry

players to develop robust standards

guiding the interoperability and

performance of chip-based payment

solutions—standards that fully

support your evolving needs.

STANDARDS

SECTION IV:

At MasterCard, we know chip payment technologyso well because we helped write the book on it.Over the years, MasterCard has worked with various industry players to develop robust standardsguiding the interoperability and performance ofchip-based payment solutions—standards thatfully support your evolving needs.

EMV The EMV Integrated Circuit Card Specificationsfor Payment Systems is a global standard thatserves as the cornerstone of the payment industry’smigration to chip. By adopting this standard and using MasterCard M/Chip, banks and merchants are assured of global interoperability.

ENABLING STANDARDS,

25

Our process is logical, comprehensive,

and based on years of experience

in leading chip migration programs

all over the world.

26

EMVCo, LLC, was formed in February 1999 byEuropay International, MasterCard Internationaland Visa International to manage, maintain andenhance the EMV standard as technologyadvances and the implementation of smart cardprograms become more prevalent. The formationof EMVCo ensures that single-terminal and card-approval processes are developed at a level thatwill allow cross payment system interoperabilitythrough compliance with the EMV specifications.Today the primary role of the organization, whichis controlled by MasterCard International and Visa International, is standards maintenance thatensures interoperability and acceptance of payment system integrated circuit cards on aworldwide basis. EMVCo is also responsible for a type approval process that defines test requirements and test cases that are used for terminal compliance testing.

Chip AuthenticationProgram The Chip Authentication Program (CAP) is thespecification underlying the OneSMARTAuthentication package, described earlier. Itdescribes in detail how M/Chip EMV functionalitycan be used to support chip authentication. A fullfunctional specification entitled MasterCardSecureCode™ 3-D Secure Chip AuthenticationProgram - Functional Architecture - June 2003 isavailable to vendors wishing to develop cards,card readers or authentication servers compatiblewith the OneSMART Authentication package.

MasterCard Open DataStorageThe MasterCard Open Data Storage (MODS) specification defines the application which isrequired alongside M/Chip to support data storageand retrieval for the OneSMART Web andOneSMART Retail packages. A full functionalspecification is available as MasterCard Open DataStorage Specification - Version 2.0 - December2002. This specification defines both the applicationitself, which resides on the card, and also theApplication Programming Interface (API) which isused by vendors developing terminal applicationsthat make use of the specification, and that may,in the future, result in additional value-addedpackages that rely on MODS.

MasterCard® PayPass™

MasterCard PayPass is built around globallyinteroperable standards and relies on the ISOTelecommunications Standard #14443 to transmitTrack 2 data via Radio Frequency (RF) technology.

In markets where the majority of transactions areauthorized online, the payment application data is based on the magnetic stripe information. The card/terminal interaction is based on theMasterCard Proximity Chip - Online Profile, whichis a subset of EMV/ISO7816 commands.

In markets where banks are building an infrastructurebased on the EMV standard, MasterCard customershave the option of using the additional securityprovided by EMV chip to enable offline authorization. This version, known as PayPassM/Chip, forms the basis of the OneSMART PayPasspackage described earlier. A full functional specification is available as PayPass – M/ChipTechnical Specifications - Version 1.0 - January 2004.

SPECIFICATIONS AND PLATFORMS

MULTOS™

Individual card applications, such as M/Chip 4, cannot reside directly on a payment card. Theymust be placed first on a chip operating system,or platform, which securely manages the applicationloading, performance and overall card security.

MasterCard actively supports all smart card platforms, freeing our customers to focus onbusiness issues, rather than technology, whenmaking decisions regarding their payment programs.

Recognizing that some issuers want flexibilitywhen it comes to the platform technology theyselect, our overall strategy is to provide choicewherever possible. Accordingly, we have deployedour flagship M/Chip 4 credit/debit payment application on MULTOS, Java Card, and the majorproprietary platforms available today.

MasterCard continues to strongly support—andhelp guide—the MULTOS platform.1 We haveworked over the years to make MULTOS a totallyopen, cost-effective, and highly secure solutionfor multi-application smart cards.

MULTOS is extremely secure, and is the only smartcard operating system to achieve an InformationTechnology Security Evaluation Criteria (ITSEC) Level E6 security rating—the highest possible ratingachievable under the rigorous, internationally recognized, ITSEC security process. A set of criteriafor evaluating computer security, ITSEC operateson a scale of ascending levels of assurance (levelE0 to E6), that can be placed in the security functions,thus determining the rigor of the evaluation.

This means that with MULTOS, applications aresecurely segregated from each other on the cardand can be loaded to or removed from the cardunder strictly controlled, high-security conditions.So, issuers can choose to add new cardholderfunctionality without reissuing a new card bydownloading whole new applications remotely.

MULTOS is an open and mature specification.Application developers pay no royalties and can beconfident that their applications will run on anyMULTOS card. As a result, MULTOS now supportsa very large range of off-the-shelf applications covering not just payment but also functions suchas loyalty, health applications, digital signatures,biometrics, physical access and many more.

27

OneSMART

MasterCard

MIGRATION

GROWTH

STANDARDS

1 MasterCard shares ownership of the MULTOS specification withthe other members of the MULTOS Consortium.

28

Our OneSMART packages

respond to specific market

needs—needs we identify

through talking with consumers.

Our OneSMART packages

respond to specific market

needs—needs we identify

through talking with consumers.

Card payments in

places—and across

merchant categories—

never served before

YOUR MOVE

29

SECTION V: YOUR ONESMART MOVE

MASTERCARD SPECIALISTS AROUND THE WORLD At MasterCard, our most valuable assets are our people, and we invite you to reach out to andwork with our chip experts to design and launch your chip program.

Asia Pacific, Middle East, Africa

Canada

United States

Europe

Latin America/Caribbean

Global

MasterCard InternationalAustralia Regional Office Level 10 146 Arthur St. North Sydney, NSW 2060 Australia

MasterCard International12, Upper Ground FloorAntriksh BhawanKasturba Ghandhi MargNew Delhi, India110 001

MasterCard International16th Floor Sandtoncity Office TowersCnr Rivonia Road & Fifth StreetSandton 2146 South Africa

MasterCard InternationalThe Exchange Tower130 King Street West Suite 3680P.O. Box 52 TorontoOntario M5X 1B1

MasterCard EuropeChaussee de Tervuren 198A1410 Waterloo Belgium

MasterCard InternationalAv. Insurgentes SurNo. 1605 – Piso 16Col San Jose InsurgentesMexico, D.F. 03900

MasterCard EuropeChaussee de Tervuren 198A1410 Waterloo Belgium

Region Chip Contact Office Address Phone Number

Shuan GhaidanVice President, Advanced Payment Solutions shuan_ghaidan@mastercard.com

Vivek SagarDirector, General Operationsvivek_sagar@mastercard.com

Gary ByrneVice President, GeneralOperationsgary_byrne@mastercard.com

Nagesh DevataMember Business Managementnagesh_devata@mastercard.com

Martyn CooperVice President, e-Business Groupmartyn_cooper@mastercard.com

Brian MorrisVice President, e-Businessbrian_morris@mastercard.com

Ricardo LeonHead of e-Businessricardo_leon@mastercard.com

MasterCard Global Chip Center of ExcellenceChip_help@mastercard.com

Australia

India

South Africa

Toronto,Canada

Toronto,Canada

Waterloo,Belgium

Mexico

Waterloo,Belgium

Telephone +(61)-2-9466-3759

Fax +(61)-2-9466-3781

Telephone +(91)-124-5061100 (x) 107

Fax +(91)-124-5060880

Telephone +(27)-11-780-03961

Fax +(27)-11-780-3999

Telephone +(416)-365-6671

Fax +(416)-365-6670

Telephone +(416)-365-6686

Fax +(416)-365-6670

Telephone +(322)-352-5743

Fax +(322)-352-4978

Telephone+(52)-55-5480-8071

Fax+(52)-55-5480-8010

Telephone +(322)-352-5678

Fax +(322)-352-5580

30

As you’ve seen, the OneSMART MasterCard program gives you powerful capabilities to growyour payments business while lowering costs andrisk. Each of our OneSMART packages respondsto a specific market need—needs that we identifythrough talking with consumers, listening to whatthey want and developing solutions to help youwin their business.

The future has indeed arrived. And, ourOneSMART packages are ready for deploymentnow. Strategically, the time is right to adopt theserevolutionary, proven tools for building your portfolio—and no one is better positioned to helpyou succeed than MasterCard. From the earliestproof of concept tests to limited pilot programs to

national rollouts around the world, MasterCardhas consistently been an industry leader in exploiting the powerful payments capabilities ofchip-based technology.

Looking for more details? Our OneSMART CD-ROMprovides a “Guided Tour” of key documents to helpyou better understand MasterCard’s chip program,services and support.

To make your OneSMART move, please contact your MasterCard representative, visit us on the Web at www.mastercardonline.com, or e-mail us at chip_help@mastercard.com.

SKU 0000�2004MasterCard International Incorporated

To make your OneSMART move, please contact your MasterCard representative

or e-mail us at chip_help@mastercard.com.www.mastercardonline.com

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