QR codes are everywhere because anyone can read them, anyone can use them, anyone can write them. This is in part because there is no security infrastructure. The result in China, where there was little card infrastructure in place beforehand, was the near-ubiquity of QR in the world’s biggest mobile payments market.
“Ogilvy & Mather and Ipsos concluded in a survey of China’s mobile payment market that ‘[Chinese] mobile payment has permeated all aspects of life and changed basic, everyday habits.’”
From “How Chinese Mobile Payments Are Quietly Conquering the World“.
It seemed to us that fraud would be an inevitable consequence of this QR-centric approach, that is indeed what happened. Last year, for example, the South China Morning Post reported that in March 2017 some 90m Yuan were stolen via QR code scams in Guangdong alone (a suspect in one case was found to have replaced merchants legitimate bar codes with fake ones that embedded a virus to steal personal information) and that in China as a whole, a quarter of viruses and trojans were coming in via QR.
Now, while even the man who invented QR codes says that they are an interim technology, there’s no denying that they are here to stay. Hence it makes sense to find a way to make them more secure, and the obvious way to do this is two-factor authentication (2FA). It turns out that the Chinese regulators have come to the same conclusion and have implemented the equivalent of the European Union (EU) Second Payment Services Directive (PSD2) Regulatory Technical Standards (RTS) on Secure Customer Authentication (SCA).
“Under new rules released by the People’s Bank of China [in December 2017], all transactions over 500 yuan (US$76) will be subject to additional levels of verification. As the transaction value passes each trigger point – 1,000 yuan, 5,000 yuan and unlimited – so the security checks will increase.”
Introducing further authentication methods makes obvious sense. Just as in the UK we have contactless for low-value payments but 2FA for higher-value payments (ie, chip and PIN for cards or CDCVM for mobile), QR will be used for low-value payments but 2FA will be required for higher-value payments. Of course, in the Chinese system, QR works just as well on-line as in-person whereas in our system we don’t use chip and PIN online.
This is where we (ie, the industry) should focus our efforts in 2018, since card-not-present fraud is currently growing at 9% per annum in the UK. So what is the way to use chip and PIN online? Well, we already know – it’s the combination of web and mobile browsing with mobile wallets for transactions. When I see a web form asking me to type in my card details – in 2018 already! – my heart sinks. I’ve used ApplePay in-browser a couple of times now (which is the equivalent of using chip and PIN online, as it uses the token in the wallet on the iPhone to complete a web transactions) and I’m already frustrated that more web sites don’t use this kind of solution. If we put our minds to it, we can have online payments that are as ubiquitous as in China, but more secure.