Pay-by-wave: At least it's better than being mugged
Takes 400ms to nick £15, but you'll get it back quick
Analysis The public thinks that paying with a tap of the phone is risky, with criminals able to intercept and steal credentials, so it seems a good time to take a closer look at proximity payments.
Orange Quick Tap is already deployed in the UK; we used one to buy cookies in Inverness and they were delicious. In the US Google Wallet is already on the streets and can host a pair of payment schemes within its secure element.
But in order to understand how secure proximity payments really are, we chatted to Orange, Barclaycard and security biz Gemalto to gauge how confident they are that no one is going to pick pockets by radio.
Millions of UK credit cards already have pay-by-wave payment technology built in, and hundreds of thousands of retailers accept these proximity payments, but Gemalto (which makes the secure elements in SIM chips) found that only a third of the population knows what near-field communication (NFC) is. More than a third reckon they'd never pay by tap because they believe it will never be secure. Which is a shame, because it's at least as secure as the alternatives, and it will come whether the public wants it or not.
How does it work?
Today's proximity payment systems are based on the NFC standard, which uses a radio connection at 13.56MHz for short-range peer-to-peer communications. The same frequency is used by RFID tags, in a simplistic way, but NFC is a good deal more complicated, and expensive.
RFID tags are powered by the received radio signal, so various groups have demonstrated that by upping the radio signal strength they can read the tags at a considerable distance - 80 miles if some are to be believed. But NFC devices are a lot more complicated, and (critically) draw power from a wireless induction loop in the reader, not from the radio signal.
That's important, because a radio signal can easily be amplified to increase the range, but running induction power over a distance of more than a few inches requires huge amounts of energy and an enormous loop. So anyone planning to interact with your NFC card, or phone, from more than a meter will probably have your hair standing on end and coins heating in your pocket.
Not that most would bother: snuggling up close is easy enough on public transport so getting within 10cm of your phone, or credit card, should't be a problem.
But it's not just a matter of getting close. The NFC component won't communicate with just anyone, our miscreant needs to get hold of a legitimate reader - perhaps by registering as a merchant under a suitably false identity. That registration will provide a bank account for our thief to stash his ill-gotten gains, temporarily, though it also exposes our crook to considerable attention which will make it easier to track him down later.
Soft readers, which are smartphone apps that can operate as an electronic till, will come along soon enough, making it easier for our thief to nick cash. But even then the bank will only transfer money into a named account, so our swindler will have to have that set up and register it with the payment scheme.
But assuming creative use of a false moustaches and forged identity documents our man now has his fake merchant account and is right next to you, with a reader communicating direct to your pocket. Transactions are supposed to complete within 400ms so he won't have to stand close for long. But far from just reading the NFC tag the process is comprised of a number of cryptographic steps which further complicate things for our chap.
How will I be protected?
The reader first asks the card for a list of payment schemes it has installed (NFC allows one card, or phone, to host multiple methods). The user might have specified only one to be used by default, or might have a priority order, while the reader will likely only work with one or two payment schemes so the process will only continue if a match can be found.
Once the reader has indicated which payment scheme it would like to use, the card or phone presents the public component of the appropriate key pair, digitally signed by the issuing bank (say, Barclays), and the payment scheme (say, PayPass). The reader then uses the (PayPass) public component to verify the key is genuine, and issues a cryptographic challenge to the card to confirm that it has the private half of the pair safely hidden inside.
The details vary between schemes, but in general that challenge will include the terminal and merchant identities, and the amount of the transaction. The card will only sign the response if the amount is below its own transaction limit (currently £15 in the UK, but could be user-definable on a phone).
The card can, and generally does, increment a transaction counter to reflect the communication.
For online transactions there's then some mucking about with back-end servers, but for fast transactions (and hack attempts) the signed transaction details are stored so they can be passed on to the bank later for reconciliation.
So an attacker could set up a fraudulent merchant account, then roam the capital's Underground with a battery-powered reader lifting as much as £15 a time off the unsuspecting public before cashing in at the end of the day. The bank may get suspicious about the sudden rash of transactions, and our attacker will need to cash-in before any of his marks notice.
An NFC-equipped phone will probably beep each time it completes a transaction, and the Samsung Tocco vibrates too. Similarly, a phone will show an on-screen receipt, and might be set up to require a correct PIN before each use - according to Gemalto more than 60 per cent of those involved in the Nice trials set up their phones that way.
An NFC reader can ask a card if it's installed inside a phone, or is embedded in a lump of dumb plastic (a traditional credit card). Our attacker can therefore program his reader to ignore all phones and focus on the dumb plastic to reduce the risk of it buzzing or leaving an on-screen receipt. Card users won't notice until they check their account or run out of cash.
At which point the bank looks at the transactions with the customer, identifies the fraudulent merchant and claws back what money they can, as well as reporting the fraudster to the police. Punters who've been ripped off are easily identified and most will have their £15 refunded before they even notice it's gone. In the case of a dispute the money is refunded to the customer while the bank sorts out the details with the merchant, though the customer may be required to jump through some hoops just as with credit card refunds today.
Physical mugging versus wireless theft
A simple robbery or pickpocket results in the victim jumping through the same hoops, though again the NFC phone has distinct advantages. A cutpurse who has your cards can use those equipped with NFC to pay for items costing less than £15, at least until he hits a shop using online verification: the card will shut itself down when informed by the reader that it's been reported stolen.
An NFC component in a phone doesn't have to wait to be used, of course: if the phone is switched on then the payment scheme will be able to reach out and cancel the installed cards as soon as the theft is reported.
None of this says that proximity payments are immune from fraud and theft, but the industry certainly expects the technology to reduce criminal loss rather than increasing it. Money is very prone to being stolen, by shop staff as well as muggers, and it’s the desire of retailers to remove cash from the equation that is the driving force behind proximity payments.
So if you're really worried about the security issues of proximity payments then the safest thing to do is get the cards installed into a mobile phone. Right now that limits one to an instance of a Barclaycard on a Tocco handset with Orange, which, given the lamentable performance of the Tocco, might be too high a price to pay.
However more handsets are coming and while NFC might seem a little too convenient to be secure, there really are bigger things to worry about than miscreants picking one's pocket over the airwaves. ®