Enhancing Regulatory Compliance in Digital Payments: Unlinkability and Privacy in EMV 2nd Gen Transactions

With the increasing adoption of EMV-based digital payment systems, ensuring compliance with privacy regulations (GDPR, PSD2, PCI DSS) has become essential. A critical challenge in regulatory-compliant payment transactions is the risk of transaction linkability, which can expose sensitive user data and violate privacy mandates. In this paper, I analyze the privacy vulnerabilities of EMV 2nd Gen payment protocols and propose an improved key agreement mechanism to enhance unlinkability and transaction security. The approach builds on the Blinded Diffie-Hellman (BDH) key establishment protocol, integrating cryptographic enhancements to mitigate active and passive tracking threats. I introduce a stronger unlinkability definition, accommodating active attackers and ensuring compliance with EMVCo security requirements. The proposed scheme uses anonymous credential techniques to prevent transaction tracing while preserving authentication integrity. Experimental results show that the method significantly improves transaction unlinkability, reducing privacy leakage risks and aligning with regulatory standards in secure payment processing. This research highlights the role of privacy-preserving cryptographic techniques in ensuring regulatory compliance for modern digital payment ecosystems.