Victoria Saporta, BoE executive director for prudential supervision, has said recently that minimum resilience requirements should be required for the tech giants’ (and others’) hosting services, before they may process and store banking data. We strongly support these comments. We have identified this issue as one of a number of new risks arising from modern financial systems architecture, in recent Structured Risk Analyses that we have carried out for financial and retail organisations in North America, Asia-Pac and EMEA.
In the new digital economy, digital identity is a key component to ensuring security, privacy, and convenience for people and businesses.
A couple of weeks ago I wrote a piece for our friends at Smartex; ‘Brexit and the UK Finance’s proposed £100 contactless limit’. Perhaps a title more worthy of grabbing readers would be ‘Will Brexit make stealing bank cards attractive again?’
The pandemic has accelerated consumer behaviour that has been teetering for the last decade. The desire for contact-free (and therefore contactless) transactions, has meant a significant trend in consumers becoming comfortable with tapping their cards and perhaps more interestingly, their phones (devices/wearables). We’ve seen merchants switch from hand scribbled ‘cash only’ signs, to ‘please use cards (devices etc) wherever possible’. Some stores have completely rejected cash altogether.
Recently I saw this article suggesting that 97% of mobile transactions in Asia are fraudulent? Can this really be true? I decided to investigate.
The article highlights an excellent report published by Secure-D looking into mobile ad fraud, which it appears is a largely hidden multi-billion dollar enterprise, impacting emerging markets in particular. As you might expect with an enterprise of this size it is multi-faceted and complex. Two of the ways fraudsters are making money are as follows:
- Fake clicks: The internet runs on advertising revenues obtained when a user clicks on an ad in a mobile app or on a web page. Fraudsters have numerous ways to create fake clicks, that look like they’ve come from a real person, and then be paid the associate fee. One way that they do this is by deploying malicious apps to the devices of unsuspecting users often disguised as a legitimate app offering an innocuous service like providing weather information.
- Hidden purchases: Many mobile users in emerging markets are unbanked and use their prepaid mobile airtime to purchase goods or services. Those malicious apps deployed to devices can also then siphon off funds from users without them realising it is happening. They just see their airtime running out more quickly than it otherwise might.
As Consult Hyperion, and as many other analysts, predicted, Covid-19 has driven the adoption and use of contact-free technology at the point of service. A recent survey funded by the National Retail Foundation, found that no-touch payments have increased for 69 percent of US retailers surveyed, since January 2020. In May, Mastercard reported that 78% of all their transactions across Europe were contactless.
Fraudsters are always looking for ways to take advantage of potential weaknesses or even inexperience in new payment devices. A recent news story promoted a man in the middle attack in which two phones are used to transfer and manipulate the transaction message between a stolen contactless card and the point of sale terminal.
At Consult Hyperion we take a certain amount of enjoyment looking back over some of our most interesting projects around the world over the previous year or so, wrapping up thoughts on what we’re hearing in the market and spending some time thinking about the future. Each year we consolidate the themes and bring together our Live Five.
2020 is upon us and so it’s time for some more future gazing! Now, as in previous years, how can you pay any attention to our prognostications without first reviewing our previous attempts? In 2017 we highlighted regtech and PSD2, 2018 was open banking and conversational commerce, and for 2019 it was secure customer authentication and digital wallets — so we’re a pretty good weathervane for the secure transactions’ world! Now, let’s turn to what we see for this coming year.
Our Live Five has once again been put together with particular regard to the views of our clients. They are telling us that over the next 12 months retailers, banks, regulators and their suppliers will focus on privacy as a proposition, customer intimacy driven by hyper-personalisation and personalized payment options, underpinned by a focus on cyber-resilience. In the background, they want to do what they can to reduce their impact on the global environment. For our transit clients, there will be a particular focus on bringing these threads together to reduce congestion through flexible fare collection.
So here we go…
1. This year will see privacy as a consumer proposition. This is an easy prediction to make, because serious players are going to push it. We already see this happening with “Sign in with Apple” and more services in this mould are sure to follow. Until quite recently privacy was a hygiene factor that belonged in the “back office”. But with increasing industry and consumer concerns about privacy, regulatory drivers such as GDPR and the potential for a backlash against services that are seen to abuse personal data, privacy will be an integral part of new services. As part of this we expect to see organisations that collect large amounts of personal data looking at ways to monetise this trend by shifting to attribute exchange and anonymised data analytics. Banks are an obvious candidate for this type of innovation, but not the only one – one of our biggest privacy projects is for a mass transit operator, concerned by the amount of additional personal information they are able to collect on travellers as they migrate towards the acceptance of contactless payment cards at the faregate.
2. Underpinning all of this is the urgent need to address cyber-resilience. Not a week goes by without news of some breach or failure by a major organisation putting consumer data and transactions at risk. With the advent of data protection regulations such as GDPR, these issues are major threats to the stability and profitability of companies in all sectors. The first step to addressing this is to identify the threats and vulnerabilities in existing systems before deciding how and where to invest in countermeasures.
Our Structured Risk Analysis (SRA) process is designed to help our customers through this process to ensure that they are prepared for the potential issues that could undermine their businesses.
3. Privacy and Open Data, if correctly implemented and trusted by the consumer, will facilitate the hyper-personalisation of services, which in turn will drive customer intimacy. Many of us are familiar with Google telling us how long it will take us to get home, or to the gym, as we leave the office. Fewer of us will have experienced the pleasure of being pushed new financing options by the first round of Open Banking Fintechs, aimed at helping entrepreneurs to better manage their start-up’s finances.
We have already demonstrated to our clients that it is possible to use new technology in interesting ways to deliver hyper-personalisation in a privacy-enhancing way. Many of these depend on the standardization of Premium Open Banking API’s, i.e. API’s that extend the data shared by banks beyond that required by the regulators, into areas that can generate additional revenue for the bank. We expect to see the emergence of new lending and insurance services, linked to your current financial circumstances, at the point of service, similar to those provided by Klarna.
4. One particular area where personalisation will have immediate impact is giving consumers personalised payment options with new technologies being deployed, such as EMV’s Secure Remote Commerce (SRC) and W3C’s payment request API. Today, most payment solutions are based around payment cards but increasingly we will see direct to account (D2A) payment options such as the PSD2 payment APIs. Cards themselves will increasingly disappear to be replaced by tokenized equivalents which can be deployed with enhanced security to a wide range of form factors – watches, smartphones, IoT devices, etc. The availability of D2A and tokenized solutions will vastly expand the range of payment options available to consumers who will be able to choose the option most suitable for them in specific circumstances. Increasingly we expect to see the awkwardness and friction of the end of purchase payment disappear, as consumers select the payment methods that offer them the maximum convenience for the maximum reward. Real-time, cross-border settlement will power the ability to make many of our commerce transactions completely transparent. Many merchants are confused by the plethora of new payment services and are uncertain about which will bring them more customers and therefore which they should support. Traditionally they have turned to the processors for such advice, but mergers in this field are not necessarily leading to clear direction.
We know how to strategise, design and implement the new payment options to deliver value to all of the stakeholders and our track record in helping global clients to deliver population-scale solutions is a testament to our expertise and experience in this field.
5. In the transit sector, we can see how all of the issues come together. New pay-as-you-go systems based upon cards continue to rollout around the world. The leading edge of Automated Fare Collection (AFC) is however advancing. How a traveller chooses to identify himself, and how he chooses to pay are, in principle, different decisions and we expect to see more flexibility. Reducing congestion and improving air quality are of concern globally; best addressed by providing door-to-door journeys without reliance on private internal combustion engines. This will only prove popular when ultra-convenient. That means that payment for a whole journey (or collection or journeys) involving, say, bike/ride share, tram and train, must be frictionless and support the young, old and in-between alike.
Moving people on to public transport by making it simple and convenient to pay is how we will help people to take practical steps towards sustainability.
So, there we go. Privacy-enhanced resilient infrastructure will deliver hyper-personalisation and give customers more safe payment choices. AFC will use this infrastructure to both deliver value and help the environment to the great benefit of all of us. It’s an exciting year ahead in our field!
With estimates of the sales over the Black Friday weekend in excess of £7bn in the UK and $90bn in the USA, retailers are currently focused on getting shoppers into their stores and through their checkouts as seamlessly as possible. As was apparent at last week’s US Payments Forum, the last part of that process, payment, is probably the one area that the retailer believes it has the least control over. Online the problem is even greater; consumers have a variety of ways to authenticate themselves to their bank and to their retailer, many of which leave something to be desired.
75% of sales on Black Friday are online and Cyber Monday is set to be the biggest yet. Many of these online sales depend on consumers having to manually enter card details, or log-in using dimly remembered passwords. Those who are not blessed with the memory of an elephant may have to undergo password reset processes that can involve checking rarely used email addresses or having to remember the incorrect spelling of their answers to a wide variety of questions about their past history. Having apparently completed the process, the percentage of remote transactions that are then declined by the Issuer is around 10 times greater than those completed in the store. Not all these declines will be valid, with legitimate customers being turned away in the name of fraud prevention. Even so millions of pounds of the approved transactions in the UK alone will still turn out to be fraudulent, further undermining the trust of the merchant and consumer alike.
Isn’t it strange that we live in a world where there is significant growth in online sales, but the mechanisms used to pay for those purchases are more cumbersome, less secure and less reliable than those used to buy on the high street? The good news is that the Payment Brands think that this is strange too and have a plan to fix it!
Earlier this month they published a draft version of their Secure Remote Commerce specification, which outlines an approach to promote security and interoperability within the card payment experience in a remote payment environment. The specification is currently out for public consultation. The Payment Brands are looking for feedback from those organizations which will deliver, interact with or use such solutions. (I know a few people who have read them and can help you to shape your reply if you are interested.) We may not see commercial solutions deployed in time for next year’s Black Friday event – these things take time. However they do offer the potential for interoperable payment solutions, with common authentication processes and levels of data security similar to those currently experienced on the high street.
In the short term, I really need to update the TV. So, in preparation for a flurry of holiday season internet shopping, I have cleared funds on my payment cards, cleaned the fingerprint readers on my tablets, found my long paper list of passwords and a similar list of answers to security questions. However, I can’t remember; was my first dog called Fido or Fenton?
I notice that Facebook has been hacked. Apparently, some 30 million people had their phone numbers and personal details exposed in a “major cyber attack” on the social network in September. Around half of them had their usernames, gender, language, relationship status, religion, hometown, city, birthday, device types used to access Facebook, education, work, the last 10 places they checked into or were tagged in, website, people or Pages they follow, and the 15 most recent searches all compromised. Wow.
Now, I don’t really care about this much personally. Like all normal people I have Facebook and enjoy using it to connect with family and close friends, but I don’t use my “real” name for it and I never ever gave in to their pleading for my phone number. Not because I was unsure that it would at some point get hacked (I assumed this to be the case) or because I thought that if I used it for two-factor authentication they might use it for advertising purposes, but on the general data minimisation principle that’s it’s none of their business.
(We should, as a rule, never provide data to anyone even if we trust them unless it is strictly necessary to enable a specific transaction to take place.)
One of the reasons that I don’t care is that just as people around the globe are getting spammed by fraudsters pretending to be Facebook, I’m not worried about spammers getting my data and pretending to be Facebook. When I get e-mail from Facebook, it is encrypted and signed using a public key linked to the e-mail address I use for this purpose (pseudonymous access). See…
My e-mail client (in this case, Apple Mail) will flag up if the signature is invalid. If you want to send encrypted e-mail to me at email@example.com then you can get my PGP key from a public key server (check the fingerprint is 50EF 7B0E FD4B 3475 D456 4D7E 7268 01F2 A1C5 075B if you want to) and then fire away. It’s not that difficult. Facebook asked me if I wanted secure e-mail, I said yes, they asked me for my key, I gave it to them. End of. I really don’t understand why other organisations cannot do the same.
Banks, for example.
Here’s an e-mail that I got purporting to be from Barclays. They are asking me for feedback on their mortgage service and inviting me to click on a link. I suppose some people might fall for this sort of spamming but not me. I deleted it right away.
This of course might lead reasonable people to ask why Barclays can’t do the same as Facebook. Why can’t Barclays send e-mail that is encrypted so that crooks can’t read it and signed so that I know it came from the bank and not from spammers. Surely it’s just a couple of lines of COBOL somewhere ask me to upload my public key to their DB2 and then turn on encryption. Right? After all, it’s unencrypted and unsigned e-mail that is at the root of a great many frauds so why not give customers the option of providing an S/MIME or PGP key and then using it to protect them?
Well, I think I know. I can remember a time working on a project for a client in Europe who asked, because of the very confidential nature of the work, that all e-mail be encrypted and signed. We spent all morning messing around with Outlook/Exchange to get S/MIME set up, to sort out certificates and so forth. But we eventually got it working and sent the first encrypted and signed mail. The client called back and asked if we could turn off encryption because the people working on the project were reading the e-mail on smartphones and didn’t have S/MIME on their devices. The next day they called and asked us to turn off signing because the digital signatures were confusing their anti-spam software and all of our e-mails were being put in escrow.
So we know absolutely everything about security and so did our counterparts and we still gave up because it was all too complicated. It’s just too hard.
(In Denmark, however, that excuse won’t wash. The Danes have decided that e-mails containing “confidential and sensitive persona data” — which certainly includes bank details — must be encrypted. The Data Inspectorate are reasonable people though, they note that this change “will require some adjustment in the private sector” and so the new rule will be not be enforced before 1st January 2019.)
Let’s not use encrypted and signed e-mail. I’ve got a better idea. Why don’t Barclays STOP USING EMAIL AND TEXTS since they have an APP ON MY iPHONE that I use ALL THE TIME and they could send me SECURE MESSAGES using that. It’s time to move to conversational commerce based on messaging and forgot about the bad old days of insecure, spam-filled, fraudophilic and passé e-mail.
Now that the US has (finally) migrated from magnetic stripe to chip payments, and signature will soon be going too, the time has come to think about where the fraud will go next. This was the topic of a great discussion at Money 20/20 involving amongst others EMVCo, Capital One and USAA.
Obviously the first place fraud will jump to will be card-not-present transactions such as e-commerce. This is well understood by those of us who went through the EMV chip migration over a decade ago. Brian Byrne outlined the various initiatives in EMVCo to secure these transactions – Tokenisation, 3DS 2.0 (with live solutions being imminent) and SRC (which is open for public comment).
Increasingly though it’s an identity problem. Identity theft and synthetic identities are being used to attack payments in a number of ways.
Because EMV chip cards are much harder to counterfeit than magnetic stripe cards, fraudsters instead will try to get their hands on genuine cards. This could be through opening a fraudulent account or by taking over an account and ordering a replacement card.
Identity fraud will be a big issue in faster payments too, with a need for good authentication on both ends of the transaction.
Synthetic identities are a particular challenge. Detecting them is tough, spotting the subtle clues that indicate that an identity record which looks legitimate has actually be cultivated over time by a fraudster. And this is big business, with criminals using the latest machine learning and ready access to data (thanks to all of those breaches) to launch well organised attacks at scale.
In the following session, Professor Pedro Domingos (author of “The Master Algorithm”) gave the great quote “if you try to fight machine learning with code you are doomed”. But it is not simply a case of implementing machine learning. As the Prof explained, the characteristics of fraud are constantly changing so any machine learning system will need to be constantly tuned and re-trained to keep up.
Definitely a case of whack-a-mole.
At Consult Hyperion we’re always interested in the latest news in cyber security and in case you haven’t heard, 2018 has started with the news that the most processors found inside current computers, tablets, phones and cloud servers are vulnerable to a new class of attack. These attacks have been named Meltdown and Spectre, and are caused by common optimisations built into modern processors. Processors designed by Intel, AMD and ARM are all affected to varying degrees and, as it is a hardware issue (possibly dating back to 1995 if some reports are correct), it could affect any operating system. It’s likely the machine you’re reading this on is affected – whether it’s running Windows, Macs, iOS, Android or is in “the cloud”!!
At a basic level, these vulnerabilities break down the fundamental security barriers between an application and the operating system (OS). This means that a malicious application running on your processor may be able to read your, or your OS’s, secrets which may include passwords, keys or possibly payment data, present in processor caches or memory.
I’m not going to discuss how the vulnerabilities achieve what they do (there’s plenty of sites which attempt to do this), however I’d rather consider its impact on people, such as our clients, who may be handling sensitive data on mobile devices – e.g. payments, banking information. If you do want to understand the low-level details of the vulnerabilities and how they work, I suggest looking at https://spectreattack.com/ which has links to the original papers on both Spectre and Meltdown.
So, what can be done about it? The good news is that whilst the current processors cannot be fixed, several operating system patches have already been released to try and mitigate these problems.
However, my concern is that as this is a new class of attack, Spectre and Meltdown may be the tip of a new iceberg. Even over the last week, the issue has changed from it only affecting Intel processors, to now including AMD and ARM to some extent. I suspect that over the coming weeks and months, as more security researchers (and probably less savoury characters as well) start looking into this class of attack, there may be additional vulnerabilities discovered. Whether they would already be mitigated by the patches coming out now, we’ll have to see.
It should also be understood that for the vulnerability to be exploited, there are a few conditions which must be met:
2. You must have a vulnerable OS (i.e. unpatched)
3. An attacker must be able to execute their malicious code on your device
For point 1, most modern devices will be vulnerable to some extent, so we can probably assume the condition is always met.
Point 2 highlights two perennial problems, a.) getting people to apply software updates to their devices and b.) getting access to appropriate software updates.
For many devices, software updates are frequent, reliable and easy to install (often automatic) and there are very few legitimate reasons for consumers to not just take the latest updates whenever they are made available. We would always recommend that consumers apply security updates as soon as possible.
A bigger problem for some platforms is the availability of updates in the first place. Within the mobile space, Microsoft, Apple and Google all regularly release software updates; however, many Android OEMs can be slow to release updates for their devices (if they release them at all). Android devices are notorious for not running the latest version of Android – for example, Google’s latest information (https://developer.android.com/about/dashboards/index.html – obtained 5th January 2018 and represents devices accessing the Google Play Store in the prior 7 days) shows that for the top 81% of devices in use:
• 25% are running Nougat (v7.x, released August 2016)
• 30% running Marshmallow (v6.0, released October 2015)
• 26% running Lollipop (v5.x, released November 2014).
It should be noted that Google’s Nexus and Pixel devices have a commitment to receiving updates for a set period of time, and Google is very keen to encourage OEMs to improve their support for prompt and frequent updates – for example, the Android One (https://www.android.com/one/) programme highlights that these devices get regular software updates.
If you compare to iOS, it’s estimated (https://data.apteligent.com/ios/) that less than a month after it was released in December 2017, over 75% of iOS devices are already running iOS 11.
Thinking specifically about mobile banking and HCE payment applications, which is what interests many of our customers – these applications should already be including protections to prevent, or at least detect, malicious attacks. These protections typically include numerous measures such as root/jailbreak detection, code obfuscation, data minimisation, white-box cryptography and so on.
If anything, these latest vulnerabilities are a useful reminder that security is not a single task within a project plan, ticked off when complete before moving onto the next sprint or task. Rather, it is an ongoing concern for the lifetime of the system – something that Consult Hyperion quietly helps its customers with. A year ago, few would have considered this class of attack to either have been possible, let alone something which needs to be actively mitigated.