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How does the Coin universal credit card work?

Answer by Brian Roemmele:

A Dynamically Changing Electronic Payment Card Called Coin

Kanishk Parashar CEO of Coin [1] developed a $50 (currently) .84 mm card that stores eight payment methods that uses a dynamic programable magnetic strip that simulates the magnetic strip of a legacy payment card.  The Coin app stores an unlimited  number of payment card data in an encrypted manner that can be loaded into one of the Coin card memory locations.  The Coin card is a Bluetooth Low Energy (BLE) device and is designed to communicate between the Coin card and Coin mobile app and has about a two year battery life.

Part of the payment card magnetic strip 3 track data is read in to the Coin app by way of a very familiar device that resembles the Square card reader.  The cardholder swipes the card and then takes a picture of the card as a visual clue to the card that is being used.  At this point the image is not used to decode the card numbers and in most cases the card numbers are unreadable.  However the image may serve as a confirmation of the information found on the 3 track data received by the card swipe.  There has been rumors of a license from one of the companies that has perfected the decoding of credit card images.

Once the payment card(s) are recorded they can then be deployed to the Coin card via Bluetooth.  The Coin card has a three line LCD display that is controlled by an integrated button that scrolls through the cards that are currently present on the Coin card.  The large center line of the LCD display shows a four character display that the cardholder selects as a memorable name for a particular payment card.  The nine character lower LCD line displays the first eight digits of the payment card. The top line displays the sequential number of the cards stored in the device.

Coin uses 128-bit SSL to the server and 256-bit encryption on the Coin card itself.

The Coin Technology

Coin is based on Sparkfun’s Arduino Pro Mini [2] running an Amtel ATmega328 [3]  MCU operating at 8MHz and external resonator with an added Bluetooth Low Energy bridge, antenna, 3 line LCD screen, a magnetic strip simulator, mechanical low profile button and coin battery.   Arduino [3] is based around an open-source single-board micro controllers with software that consists of a standard programming language compiler and a boot loader that executes on the micro controller.  It is a useful platform for hobbyists and rapid development and prototyping.

Prototype of the original Coin card, the magnetic strip simulator is the silver foil strip at top and the copper coil induction loop at the center.

Block diagram of the Sparkfun’s Arduino Pro Mini board.

Early Coin Arduino Pro Mini based circuit board pin out plans

Coin At The Merchant

The card holder would select the method of payment by pressing the integrated button on the Coin card until the correct simulated payment card is selected.  They would present the card to the merchant and Coin would generate via the internal coil a magnetic signal that simulates the same data that was read by the payment card reader and the three tracks of data.  The induction coil actully drains battery quite rapidly and thus is only activated when a sufficient megnetic field is detected at the payment card terminal.

If all goes to plan the legacy or new iOS/Android payment card processing solutions should register a positive transaction.

An added benefit is the Coin card is electronically leashed to the smartphone via Bluetooth and will signal the app when it detects a distance separation.  Thus one would be reminded to collect the card and even find the card.

Coin And The Practical And Pragmatic Merchant

Thus far all of this sounds quite compelling and frankly very useful for most of us.  However most merchants will be very skeptical about accepting what is clearly not a Visa, MasterCard, Discover or American Express card.   They also would be very challenged by the rules and guidelines that all of the payment card issuers and payment card processors present to the merchant for detecting payment card fraud in the US with cards that have magnetic strips.

Standard issue Visa branded merchant security features flyer.

Standard issue MasterCard branded merchant security features flyer.

Standard issue American Express branded merchant security features flyer.

As old fashioned as this may sound the legacy payment card has a number of very clear security elements.  These elements although seeming trivial, they are really quite important and useful:

  1. The payment card logo
  2. The hologram
  3. The raised numbers and raised card holder name
  4. The signature panel
  5. The cardholder’s signature
  6. The reprinting of the payment card number and the CVV2 number in the signature panel
  7. The expiration date

Thus far Coin card does not have any of these security features.  This may have an impact on acceptance at some merchants.  All merchants agree to examine each payment card for these minimum security features.  If the payment card companies can demonstrate that these features were not examined, they could hold the merchant, even though they swiped the card, 100% fully liable for any repudiation by the cardholder that results as a chargeback.  This means the merchant could face losing the full amount of the transaction plus a penalty fee that can be from $25 to hundreds of dollars.   They can reject acceptance of the card and in some circumstance retain the card under the Code 10 procedure. 

The Code 10 merchant procedure is a process for a card that is considered suspect:

CALL FOR A CODE 10 AUTHORIZATION

Call your authorization center immediately and ask for a "Code 10" if:

  • You believe you have a counterfeit or altered card.
  • The transaction is suspicious.
  • The account number is listed on the warning bulletin.
  • The signatures don't match.
  • You become suspicious for any other reason.

You will be asked a series of "yes" or "no" questions. Hold the card while the operator gives you instructions.

I would not suggest using this method to pay a $500 bar tab at a Texas Country Western saloon at 2 am until this type of system is rather mainstream.  Hass and the boys may not like your “funny card”.

Official Rulings And New Technologies

Thus far none of the payment card companies have presented an official ruling on systems like Coin card and may or may not endorse them.  Time will tell. Unofficially it is my assessment that they are watching this closely and do not want to injure innovation but at the same time want to protect cardholders and merchants.

Both MasterCard and Visa have experimented in this space before, not exactly Coin but moving in this direction.  There are a number of patents that surround some of the methods used:

All of the payment card companies will require merchants to have payment card terminals that can accept EMV and/or wireless EMV (NFC) by the end of 2014 or the merchant will risk full chargback liability.  There will also be lower rates in the future for merchants that have deployed these upgrades.  Thus over the next ten years we will see the magnetic strip being slowly deemphasized. 

This leaves this whole concept in a bit of a limbo.  I can say that I personally will invest in just about all of these devices because I think they have merit. I have purchased a Coin card as well as competing systems.

Quora has a resident expert on these types of systems and the challenges they face, Chris Bartenstein of Protean Payment.  I am rather certain his practical and pragmatic insights on developing systems like Coin would be quite valuable.

It is also important to understand that Apple will be entering into this space in a very unique manner.

I Support Innovation And The Solving Of Real Problems

I want to make it very clear, I think that Coin has created a very compelling product and I think they are at the correct price point and they really solve at least a short term problem.  It is clear by the first three hours, sell out that there is a great deal of early adopter interest. It is my hope that great and innovative ideas flourish in payments.

_____
[1] Coin
[2] Arduino Pro Mini 328 – 3.3V/8MHz
[3] ATmega328
[4] Arduino

View Answer on Quora

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