1. ProxyEMVPay (PEP) Solution
(Decoupled Tokenization)
by
Milos Dunjic
(Lungo Consulting Inc.)
and
Nebo Djurdjevic
(Lina Consulting Inc)
1P A T E N T P E N D I N G

2. Current approach to payment tokenization
2
Bank A – credit card
Bank A – debit card
Bank B – credit card
Bank B – DDA account
Store card
Private Label card
Corporate card
Bitcoin wallet
Financial accounts Payment devices
Cards
iPhone
Android phone
tablet
laptop
AppleWatch
Car
SmartTV
keyfob
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Each card account requires multiple tokens, to be supported by the
Issuer, Scheme and device OEM – myriad of systems, inconvenient
and not covering all consumer accounts/devices
pushing digital card tokens to
connected devices only
P A T E N T P E N D I N G

3. PEP approach: decoupled tokenization
3
Bank A – credit card
Bank A – debit card
Bank B – credit card
Bank B – DDA account
Store card
Private Label card
Corporate card
Bitcoin wallet
Financial accounts Payment devices
card
iPhone
Android phone
tablet
laptop
AppleWatch
car
smartTV
keyfob
Consumer can enable any smart device containing a PEP
token to be linked to any of his/her payment accounts, and
change or deactivate the links at any time via mobile app
consumer can link any device in flexible
way to any payment account
P A T E N T P E N D I N G

4. Coupled vs. Decoupled Tokenization
• Payment Token cannot be issued
by TSP UNLESS it is uniquely
linked to a real Payment Account
(i.e. card PAN)
– Main purpose of token is to hide real
PAN during digital channel payments
– Token is permanently and statically
linked to a single payment card
account and device (at time of
issuance)
– Token can be for use in single or
multiple transactions
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• Payment Token is pre-issued as
‘inactive’ and can be linked at any
time to any Payment Account /
Instrument
– Tokenized EMV PEP cards
automatically protect payment
credentials and can be used at any
EMV-compliant POS terminal
– Multiple PEP-tokenized devices can
be securely & dynamically linked on-
demand to the same or different
underlying payment accounts (at
usage time) via PEP mobile app
– EMV security and acceptance
interface can be extended to other
payment systems in the background
(e.g. ACH, MNO carrier billing,
Bitcoin, etc.)
Coupled Tokenization
(Card Scheme implementations)
Decoupled Tokenization
(EMV-compliant extension of tokenization)
P A T E N T P E N D I N G

5. ProxyEMVPay (PEP) Card - Issuing & Perso
• PEP Card is standard EMV compliant card
– Issued as Visa, MasterCard, Amex or Discover EMV card
• Loaded with brand specific payment applets for contact / contactless
– Can be issued by non financial 3rd party, Payment Network or
traditional financial Card Issuer
– Can be offered off the shelf in stores / kiosks or ordered online
– Very cost effective to issue and operate
• Every PEP Card personalized with:
– EMV PEP Token Cryptogram Unique Key
– PEP Token (i.e. ISO/IEC 7812 compatible PEP Card Number)
– PEP Token Expiry Data
• PEP Card is issued as ‘inactive’
– In PEP TSP PEP Token isn’t linked to any underlying payment
credentials
• PEP Card must be securely linked, via PEP Mobile App to a
valid underlying set of payment credentials (i.e. ‘activated’)
• PEP Token can be ‘de-activated’
– automatically (when any of the usage restrictions are exceeded) or on-
demand (using PEP Management App)
• PEP Token can be linked to the same or different payment
credentials during different ‘activity’ periods
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PEP TSP
PEP Token NULL Payment Credentials PEP Token Expiry
PEP Token Cryptogram Master Key
PEP TSP HSM
PEP Token PEP Token Cryptogram Unique Key PEP Token Expiry
P A T E N T P E N D I N G

6. ProxyEMVPay (PEP) Card - Linking
6
PEP TSP
PEP Token Underlying Card PAN
PEP Card
PEP Mobile App
Maximum Spending Allowance
Maximum Number Of Transactions
Proof Of Underlying Card Ownership (3D Secure CAVV, ECI, and XID)
PEP Token Expiry
Step 1: Consumer provides
PEP Token + Underlying Card [PAN, Expiry Date, CVV]
+
Defines usage Restrictions like:
Maximum Spending Allowance
Maximum Number Of Transactions
Maximum Linking Time Period
Proof Of Underlying Card Ownership (3D Secure CAVV, ECI, and XID)
Step 2: Establish Linking Record
between PEP Token Data and
Underlying Payment Card Data
Step 3: Establish Usage
Restrictions Record
Step 4: Confirmation
Underlying
Payment Card
PEP Token Cryptogram Master Key
PEP TSP HSM
P A T E N T P E N D I N G
Maximum Linking Time Period

7. ProxyEMVPay (PEP) Card Transaction Flow
- PEP TSP integrated with Issuer Host
7
PEP TSPr
PEP Card
Underlying
Card Account
ACQ
Card
Issuer
Host
Payment
Network
Step 1: POS reads PEP card
EMV data
PEP Token
Step 7: Underlying Card Issuer authorizes
the request (treats it as Card Present type
if it has relationship with / trusts its own
PEP TSP)
Underlying Card PAN
PEP Token Cryptogram Master Key
PEP TSP HSM
Maximum Spending Allowance
Maximum Number Of Transactions
Proof Of Underlying Card Ownership
(3D Secure CAVV, ECI, and XID)
Step 6: PEP TSP verifies PEP card
EMV data, verifies usage
restrictions, de-tokenizes
PEP card EMV data, responds with
EMVCo Tokenization compatible
response containing Underlying
Card PAN
P A T E N T P E N D I N GMaximum Linking Time Period

8. ProxyEMVPay (PEP) Card Transaction Flow
- PEP TSP integrated with Payment Network
8
PEP TSPr
PEP Card
Underlying
Card Account
ACQ
Card
Issuer
Host
Payment
Network
Step 1: POS reads PEP card
EMV data
PEP Token
Step 2: POS forwards
PEP card
EMV data to ACQ
Step 3: ACQ sends
PEP card EMV data to
Payment Network
Step 5: PEP TSP verifies PEP card
EMV data, verifies usage
restrictions, de-tokenizes
PEP card EMV data, responds with
EMVCo Tokenization compatible
response containing Underlying
Card PAN
Step 6: Payment
Network sends EMVCo
Tokenization
compatible response
with Underlying Card
PAN data to Underlying
Card Issuer
Step 7: Underlying Card Issuer authorizes
the request (treats it as Card Present type
since it trusts Payment Network certified
PEP TSP)
Underlying Card PAN
PEP Token Cryptogram Master Key
PEP TSP HSM
Maximum Spending Allowance
Maximum Number Of Transactions
Proof Of Underlying Card Ownership (3D Secure CAVV, ECI, and XID)
P A T E N T P E N D I N G
Maximum Linking Time Period

9. ProxyEMVPay (PEP) Card Transaction Flow
- PEP TSP integrated with Acquirer
9
PEP TSPr
PEP Card
Underlying
Card Account
ACQ
Card
Issuer
Host
Payment
Network
Step 1: POS reads PEP card
EMV data
PEP Token
Step 2: POS forwards
PEP card
EMV data to ACQ
Step 3: ACQ sends
PEP card EMV data to PEP TSP for de-
tokenizing (PEP TSP own BIN range)
Step 4: PEP TSP verifies PEP card
EMV data, verifies usage
restrictions, de-tokenizes
PEP card EMV data, responds with
EMVCo Tokenization compatible
response containing Underlying
Card PAN
Step 6: Payment
Network sends EMVCo
Tokenization
compatible response
with Underlying Card
PAN data to Underlying
Card Issuer
Step 7: Underlying Card Issuer authorizes
the request (treats it as Card Present type
since it trusts Payment Network certified
PEP TSP)
Underlying Card PAN
PEP Token Cryptogram Master Key
PEP TSP HSM
Maximum Spending Allowance
Maximum Number Of Transactions
Proof Of Underlying Card Ownership (3D Secure CAVV, ECI, and XID)
P A T E N T P E N D I N G
Step 5: ACQ sends
EMVCo Tokenization
compatible response
with Underlying Card
PAN data to Payment
Network
Maximum Linking Time Period

10. ProxyEMVPay Card Use Cases: Remittances
10
• Set-up
– Solution to be offered by banks or specialized money transfer companies
– Principle: recipient will access funds on account from sender (in sending country)
by using a PEP card
• Recipient obtains (locally) a pre-tokenized, ‘inactive’ ProxyEMVPay (PEP) card (anonymous)
• Sender ‘activates’ the recipient’s PEP card in a secure way
– Sender uses PEP Mobile App and links the recipient’s PEP card to sender’s payment card account
– Sender defines Maximum Spending Allowance, Maximum Number Of Transactions
• Recipient can use the PEP card after it’s been activated up to the Maximum Spending Allowance
and/or Maximum Number Of Transactions (ATM, POS)
• Benefits
– Money transfer provider
• Full EMV security, payment credential protection
• Provision of cash on receiving end without using costly agents network
• Ability to enable sender to link his account to PEP cards from multiple recipients (also in ≠
countries)
– Senders and recipients of funds
• high convenience (fast, secure, ability to withdraw money in multiple parts, no need to
carry all cash)
• cost-effectiveness (mainly ATM fees)
• ability to spend funds with card at POS
• ability to receive funds from multiple senders on same card
P A T E N T P E N D I N G

11. ProxyEMVPay Card Use Cases:
Decoupled payment wallet
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• Set-up
– Two (decoupled) payment legs: purchase from merchant and funding by consumer
– Purchase from merchant
• Initiated at POS by consumer PEP device (e.g. card, mobile phone) provided by Third Party
Wallet Provider (TPP - can be a MNO, merchant, device OEM, any other digital wallet provider)
• Processed as a card transaction, against a central card account (wallet account) held by the
Third Party Provider (and issued by a bank partner or using own scheme license)
• Merchant is paid by his Acquirer, through normal scheme settlement with the Issuer of the TPP
card account
– Funding of wallet by consumer
• Consumer securely links a funding account to (each) PEP-enabled device (e.g. bank account via
ACH, carrier billing, card account)
• TPP wallet will initiate a funding transaction request from the linked account for each
transaction that hits the central wallet account
• Benefits
– Purchase at POS is enabled using the card network and acceptance infrastructure,
providing ubiquity without infrastructure investments
• ignites adoption of digital wallets and enables new payment business models by removing
acceptance hurdle
– Funding of the purchases is decoupled from the POS process, and provides
flexibility to consumers to choose their preferred funding method (regardless of
merchant acceptance)
– In Europe, the TPP could act as Payment Initiation service provider under PSD2
P A T E N T P E N D I N G

12. ProxyEMVPay Card Use Cases:
Retailer Store Card Programs
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• Set-up
– Closed loop program to be offered by Acquirer or directly by Merchant
– Consumer gets PEP-enabled card (and/or mobile HCE token) to serve as payment and loyalty
device
– Consumer securely links an existing payment card to the PEP device
– Acquirer will connect with PEP TSP (or run internally) for de-tokenization into linked card PAN
before routing the transaction to the card network
– Program can also be extended to group of merchants (e.g. shopping mall, lunch voucher
program, brands belonging to same group)
• Benefits
– Consumers
• single card for loyalty and payment
• integrated wallet in merchant mobile app
• no need to get a new payment account or to put funds in a prepaid account
– Merchants
• no need to offer financial accounts to consumers and take on liability/risk
• no restriction to cooperation with single financial institution
• platform for merchant to design marketing/loyalty benefits for cardholders, potentially co-funded by partner
banks (win-win)
– Acquirers
• white label loyalty and payment solution for merchants as value-added service and to create stickiness
– Issuers
• ability to create multiple partnerships with merchants, and to offer customized deals to customers based on life
style preferences and purchasing habits/interests
P A T E N T P E N D I N G

13. ProxyEMVPay Card Use Cases:
Corporate Travel Cards
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• Set-up
– Corporation has small number of REAL corporate travel card accounts (i.e. ‘PAN per cost center’)
– Corporation provides employees with pre-tokenized, ‘inactive’ EMV compatible PEP cards,
compatible with the payment network brand behind REAL corporate travel card accounts
– Before actual travel takes place, authorized corporate person
• links the employee’s PEP travel card to one of the REAL underlying corporate travel card account PANs (i.e. cost center)
• 3D Secure is used to authenticate the authorized corporate person
• Authorized corporate person sets the spending parameters (e.g. Maximum Spending Allowance, Maximum Linking Time
Period, Maximum Number Of Transactions)
– All transactions made by the employee’s PEP corporate card are authorized from the REAL corporate
travel card account (i.e. cost center), which is linked to the employee’s PEP travel card
• Benefits
– Corporation
• Real corporate card payment credential protection
• full spending control
• automatic expense consolidation to appropriate cost centers
– Employee
• convenience of a regular corporate card
• automatic expense report generation
– Corporate Card Provider
• full EMV security
• Simplicity and cost-effectiveness of issuance
• easy replacement if lost or stolen
• risk control
P A T E N T P E N D I N G

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15. 15P A T E N T P E N D I N G