In order to better meet the multi-application needs of financial IC cards across various industries, align with the latest international standards, and promote the integration of financial IC cards with online and mobile payments, the People's Bank of China has actively driven the rapid development of financial IC card deployment. To this end, it updated and revised the "China Financial Integrated Circuit (IC) Card Specification" (PBOC 2.0), officially releasing JR/T 0025-2013, titled "China Financial Integrated Circuit (IC) Card Specification Version 3.0" (PBOC 3.0) on February 5, 2013. PBOC 3.0 introduces the application of SM2 (asymmetric cryptographic algorithm), SM3 (hash algorithm), and SM4 (symmetric cryptographic algorithm), which are independently developed by China, within the security framework of financial IC cards.
I. Overview of the SM Series Algorithms and Their Applications
The SM series algorithms refer to a set of commercial cryptographic algorithms and specifications developed independently by China’s National Cryptographic Administration. In the context of financial IC cards, SM2, SM3, and SM4 correspond to RSA, SHA-1, and 3DES respectively in international standard cryptography. These algorithms have become essential components in securing financial transactions and data integrity.
In early 2012, the People's Bank of China and China UnionPay established the “GUOM J Algorithm†working group to explore the implementation of the SM series algorithms in financial IC card applications. This initiative involved collaboration with domestic chip manufacturers, system developers, POS terminals, and encryption equipment providers. The transformation of transaction tools and the implementation of SM series algorithms were thoroughly tested and validated. The adoption of these algorithms began with the use of domestic chips and gradually extended to key products such as POS machines and encryption devices. Many domestic chip manufacturers have now passed the safety certification from the Bank Card Testing Center, and relevant products supporting the SM series are currently undergoing or have completed necessary certifications.
II. Current Status of Financial IC Cards and SM Series Algorithm Adoption
1. The Promotion and Application of Jinluo IC Cards Has Achieved Significant Results
Since the launch of financial IC cards in Hunan Province in 2009, after nearly four years of development, the project has seen remarkable progress in card issuance, infrastructure upgrades, and industrial applications. As of May 2013, more than 6.8 million cards had been issued, with an average monthly increase of over 600,000. The acceptance environment for financial IC cards is now fully established. This year, 28 non-contact payment providers will be built across the province. In the public sector, 21 transportation applications have been signed, covering 12 cities and regions. Financial IC cards have entered critical public service areas such as social security, healthcare, and public transport, significantly impacting both the national economy and people's daily lives. As a result, the importance of security in these systems has grown substantially.
2. Financial Information Security Requirements Continue to Rise, and SM Series Algorithms Are Included in Standards
Following the cracking of the MIFARE CLASSIC IC card cryptographic algorithm in 2009, the industry began transitioning to the SM series algorithms. Today, SM series algorithm-supported products are widely used in high-security sectors such as government, military, universities, central enterprises, and state-owned companies.
In 2012, in response to the need for improved information security in the financial sector, the General Office of the National Development and Reform Commission issued a notice regarding the implementation of the 2012 Special Project on Safety IC Cards and Password Applications in the financial sector. This initiative aimed to support the industrialization of secure IC cards and password key products, conduct product testing, revise security standards, and promote the application of secure IC cards in the financial field. In early 2013, the newly released PBOC 3.0 specification incorporated the SM series algorithms, signaling their official adoption in the financial sector.
III. Needs for the Transformation of SM Series Algorithm Applications
Currently, most financial IC cards issued by Chinese banks use foreign chips and international standard algorithms, except for financial social security cards. The transition to SM series algorithms requires a gradual and controlled process to ensure minimal risk and smooth integration with existing systems. The transformation will follow a "step-by-step replacement" approach, allowing financial IC cards to remain compatible with both international and SM series algorithms during the transition period. Once conditions are mature, a full switch to SM series algorithms will occur, avoiding disruptions to card environments and banking services for residents.
According to PBOC 3.0 requirements, the Changsha Zhongzhi Branch of the People's Bank of China conducted preliminary research on the transformation needs across the supply chain. Key areas include:
1. CA System Transformation
China’s authoritative Certification Authority (CA) center is the China Financial Certification Center (CFCA). The transformation involving the SM series algorithms includes generating root CA keys and certificates using SM2, as well as issuing bank and administrator certificates. These certificates must support secure authentication, encryption, and decryption functions.
2. Financial IC Card Upgrades
As a core part of the SM series transformation, financial IC cards require chip and card operating system (COS) support. After the transformation, two types of card products will exist: dual-algorithm cards and single-SM series algorithm cards. Many domestic chip manufacturers already have the capability to mass-produce dual-algorithm chips, and card vendors have completed COS development and submitted them for inspection.
3. Payment System Transformation
Financial IC card payment systems consist of card issuing systems, transaction systems, UnionPay switching centers, and industry platforms. The main transformation focuses on the issuing and transaction systems. Key changes involve updating the secure authentication interface, managing templates, handling domain resolution, and verifying transactions through secure channels.
Overall, the adoption of the SM series algorithms represents a significant step forward in enhancing the security and independence of China's financial infrastructure, while ensuring a smooth and controlled transition for all stakeholders involved.
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