The basic common denominator in prepaid is the PIN, or Personal Identification Number. PIN is another name for account number, which is what stores the prepaid value. It is the PIN that identifies the user, and allows for money to be debited from the account as purchases are made or services are used.

Let’s look at what prepaid is, so we can see how important the PIN is to the process. In a prepaid service, the basic concept is that the customer loads an account with an amount of money. This applies no matter what the service or product is, from iTunes to gift cards and calling cards. All of these have an account for each user. The account number or PIN is like a little bank account that is set up when the prepaid account is established. The account can be virtual, like iTunes for online purchases, or have a physical card associated with, like a gift or debit card. 

Regardless of the form that the account takes, the principle is the same. Customers load the account with money from some source, like cash, a bank account, a credit or debit card. They then use the money in the account for purchases of product or services. Each time the PIN is used, the account is debited for the amount of the purchase. In some cases, the user, or someone else, can add money to the account so more purchases can be made. There are even arrangements where money will automatically be added when a certain threshold is reached.

 When the PIN itself is used, like in prepaid calling cards, it needs to have enough digits to prevent it from being guessed easily. For example, if you had a 3 digit PIN, and 500 active PINs, 50% of the possible 3 digit number combinations would be valid at any point in time, making it relatively easy to guess a valid number. The number of digits in a PIN must be related to the number of active accounts. Every time you add another digit, you reduce the ability to guess combinations by a factor of 10. It is usually good practice to make the odds less than one in 1000 or more, so if you take the number of active users, multiply by 1000, and count the number of digits, you will get an idea of the number of digits you need to employ in your PIN codes.

For example, if you anticipate one thousand users, multiply 1,000 by 1,000 and you get 1,000,000, which is seven digits. In this example, a 7 digit number would be minimally adequate. Every digit you add reduces the probability of hacking a code by a factor of 1,000, so it might be prudent to make it 8 digits.

Although it should be obvious, PINs must be randomly generated and not sequential. If PINs were sequential, they would be very easy to guess. Just add “1” to any valid PIN number, and you have the next valid number. A random number generator can provide whatever quantity of numbers you need. You should generate as many as you will need for the foreseeable future, since re-use is not recommended, as previous users often try to see if they can still make calls even after the card is exhausted. There are programs that will generate and manage the inventory of numbers to assure they are not easy to guess. Obvious number combinations like “77777777” and “1234567”are to be avoided no matter what.

Since PINs are the key that unlocks the account with the money stored in it, they should be protected.  An unencrypted PIN file should never be sent over the Internet, EVER. Printouts that include PINs should never be left sitting about, and if you have such printouts, they must be shredded before disposing of them. PINs should be treated with the same care as credit card numbers.  Revealing PINs to anyone along the distribution channel, including the retailer, increases the probability that someone will steal them.

Since most debit cards are branded with Visa, MasterCard, AMEX, Discover, etc. they will have the PIN, account number, printed or embossed on the card, along with expiration and CIV, or card identification number. This means these cards must also be protected from compromise.

Virtual PINs are usually a bit more secure, as are the magnetic striped and contactless cards. While they are somewhat more immune, they can be compromised under the right circumstances.

PINs are a necessary evil. Without them, it would be impossible to keep all the accounts straight, allow users to check balances, make purchases and re-load the account. But, since they are the basic commodity in a prepaid system, all the processes and procedures regarding PINs must be carefully designed and managed.

See you next class!