Will Apple Pay kill the QR code?

apple pay

An interesting question – and of course Apple Pay will not kill the QR code per se, because the QR code does a lot of different things – most notably allowing a camera on a ‘connected’ device to quickly access material without the need to type into the device, and to effect various instructions.

However, with Apple having just ‘raised the bar’ significantly in its launch of ApplePay it will undoubtedly remove the possibility for the QR code to ever gain any ground – or to make any business case again as a payment enabler. The ApplePay infrastructure is very clear now (well it is not clear at all, but we can draw together the following parts of the infrastructure:

a) The adoption of EMV and a well-practiced security is adopted.

b) NFC enabled transactions (whether you like it or not – whether it has an EU or USA adoption rate) – which ensures that the NFC standard is adopted, and they the EMV Co protocols and encryption is present.

c) Tokenisation – to protect the personal details

d) Two/Three factor authentication – i.e. using the scanned fingerprint (or whatever is scanned to validate the transaction) and then Geo-location and/or device profiling too.

e) A reduced costs (interchange fee) and liability protection for pretty much all parties.

So why not do any of this with a QR code? Technically, this is almost all possible, but of course technical possibility and a good idea in the QR codes won’t make this work. Using a QR code produced by a device (that the consumer has) would look pretty, but would mean that:

– The customer has to enter the transaction details to validate – unless another way of communicating with the merchant was created and standardised globally.

– The protections that are in the chip on a card and in the secure area in the device where the card details are stored including floor limits, counts, rules, service codes and resets would all be bypassed.

– The secure part of the chip used and set-up by Apple would have to be accessible by developers to create QR codes – which Apple should never allow (due to a compromised of that secure element (and probably not allowed by the banks/schemes either); and because they would probably not want others to use their rails – due to commercial protectionism.

– Retailers would have to create new software and protocols for reading the QR codes at the points of sale, and then create EMV CO protocols to be used to secure the transactions – which of course would preclude the retailer validation or a two way dialogue with the card / secure element.

– And ALL vendors would have to build standards for this and compete with their proprietary protocols and add massive costs for retailers.

– 3FA or further authentication validation would be impossible/hard to introduce without the EMV / NFC standards backbone.

This creates the underlying problems in:

a) The EMV Co and NFC standards, which require that there is a 2-way hand-shakes and communication with the device and the secure element and a decryption process would be circumvented.

b) The card schemes, who will have required the NFC to be adopted as the communication vehicle for the transactions to be permitted in Apple Pay would be removed,

c) The issuers to allow the transaction to attract the interchange concession, to be transacted using the EMV Co / NFC standards and a channel that can be used to validate the transaction and ensure closed security would be gone.

Accordingly, the security, payment guarantees, standards and security would all be removed or circumvented. So QR codes in the transactions for payments can now never be progressed – as Apple has surely killed it off in one single stroke by introducing something far superior, far more future proofed and adopting all the latest and global ‘industry standards’ to do this through – in a way that no-one else could have achieved and made to happen.

QR codes were only a transient interim technology, that only had a place in small ways to bridge the gap that has now been theoretically bridged.

We have heard a LOT about the impact of the ApplePay announcement on who/what will be affected, but one thing is sure: It has killed the QR code as a payment vehicle – but of course it will ‘live on’ as a very good ‘informational application’ tool where it has been used thus far – i.e. to stop people needing to type various things into a device.

Adopting QR code developments with access to secure elements in the device CHIP is NOT an option, and it is VERY VERY VERY VERY VERY unlikely that the access to the secure element (i.e. the underlying security) will be accessible to TP developers in this way either.

Author Bill Trueman, is an independent Payments, Fraud & Risk Specialist and Managing Director of UK Fraud and Riskskill

Source: https://www.linkedin.com/pulse/article/20140915153149-6227568-will-apple-pay-kill-the-qr-code

UKFraud Seeks To Reduce Mobile Wallet Payment Risks

Following the recent launch of its mobile wallet consultancy practice, risk and fraud prevention consultancy UKFraud (www.ukfraud.co.uk) has launched a range of analytical, consultancy and advisory services aimed at helping businesses in the mobile commerce and payment solutions space to ensure that their products are ‘right’ before they hit the market.

The consultancy practice was established to provide strategic advice and direction to protect mobile solution providers from creating new payment architecture solutions with insufficient protection from data breaches and other risks.  In addition, the new services offered by the practice are designed to deliver a comprehensive  assessment of new wallet product strategies. In particular, the UKFraud services will ensure that wallet providers incorporate the right customer ID and authentication technologies and processes.

In advising producers of future wallet type products, the practice’s services draw upon the research, findings and in-depth analysis of the market by UKFraud’s own Mobile Payment Special Interest Group (SIG). In its findings, the SIG recognised the need for all financial product stakeholders to develop risk reduction strategies capable of matching the projected rapid growth of the global mobile payments sector over the next eighteen months.

The launch of the new range of services  reflects a significant increase in the development and appearance of a range of wallet type products in the market. These include a number of recent, positive and influential developments, such as those from Google with their Wallet, mPowa, Skrill, and Apple with the launch of its well-received iPhone 5S with integral fingerprint reader.

The UKFraud practice also advise on a broad range of devices, architectures and platforms including smartphones, tablets and app software along with the likely fraud risks of transporting mediums such as the internet and/or mobile carriers, including NFC, Bluetooth or Wi-Fi, and entry into traditional payment gateways.

A key element of this advice is in the areas of ID and authentication. There are a number of different forms of ID and authentication techniques that wallet products can use.  These  combine traditional physical processes and technology checks with increasingly more contemporary ones such as biometrics. UKFraud aims to ensure that all elements of these technologies and processes are developed or evolved to be ‘user-proof’ as well as ‘fraudster-proof’. Key elements of a proper wallet infrastructure should include:

1. Authentication of user identity.
Someone, somewhere must always be able to verify the identity of the individual who owns the device, or at least to have protection against possible identity theft attack in the future. This is as true for any such form of identification, whether it is through a traditional approach or through evolving biometric checks. Currently there are few consistent standards in the methods with which a user’s bank account, payment preferences, or even credit history is  tied into biometric records in order to gain access to such details. This area is especially significant, as there are serious existing layers of legal requirements for identifying customers for all money transmission providers who have to meet Money Laundering, Drug Trafficking and Prevention of Terrorism compliance standards. Future Wallet providers cannot be exempt here if they are involved in the creation or handling of financial ‘events’. Thus the authentication of IDs to meet these current standards must accompany all biometrics validation tools and not be replaced by them. For this reason there must be careful planning to ensure that new identification methods are founded on strong foundations.

2. Validation of the technology architecture.
Emphasis also needs to be placed on any secure repository for the data collected. This includes analysis of where the data is securely held and how accessible such repositories are to others and just how well encrypted the data is. However, equally all transmissions that contain sensitive data need to be ‘looked after’ and protected over time. In addition, the processes, technologies, validation of identity and the transmission of sensitive data must all be based upon a technology and process base that is globally useable, acceptable and safe. UKFraud feels that this explains why so many organisations are baulking at the prospect of taking action in a non-standardised direction which risks everything.

3. Interoperability
As so many solutions are still evolving, ‘wallet events’ especially those where payment occurs, can be very different in nature. Equally where any biometrics or codes and/or passwords are used and transmitted this must also be stored somewhere in the ‘wallet’, in a device or in a cloud based solution. This is a point of risk and the potential target for attack. Further, there is  also other personal user identity data such as  entry tickets, vouchers, discount codes, club memberships, allegiances, contacts and diaries that the market has have not yet contemplated storing electronically on the mobile ‘wallet’.   This all needs to be compatible or interoperable. This interoperability often needs to be global too. The only global operability standards today rest with the major Card Scheme payment solutions which are globally linked, and completely standardised, by virtue of the authentications and controls that have evolved over decades. These are also safe and robust when dealing with criminal attacks and failures.

4. Transferability
Taking it a step further; consumers will most likely require the ability to change ‘wallet’ or data solution provider, so that we can have everything that we need still available to us when our ‘device’ breaks or changes. This facility needs to be built into the wallet and UKFraud will question whether  the new and innovative solutions they examine  follow the same or common standards that enable customers to move their funds, data and information from one provider to another with ease.

5. Reliability
A challenge that some biometric authentication has traditionally had, in addition to the commercial rollout realisation, is how well it actually works. Some of these technologies, through lack of global standards and specifications, have on occasion been the subject of perceptual concerns about some of the systems’ reliability in storing and validating data against biometric records as a consistent form of identity.

UKFraud believes that it is essential that the issues of what is stored, along with where and how it is stored need to be governed well. This includes a wide range of issues around what the fall-back is – i.e. what happens when users get locked out of their smartphones for instance – and where the data is stored and how recoverable / retrievable is it?

According to Bill Trueman the CEO of UKFraud, “Our clients understand these practical ID and authentication issues as part of their ‘wallet’ designs, and we assist them in closing gaps and weaknesses. Once these are ironed out, they can plan for the future in what is a fast and growing market filled with uncertainty and challenge. It is inevitable that many of the growing businesses in this area will fail simply because of criminal attacks or because the consumer, the merchant, the supplier or market simply ‘goes in a completely different direction’. Future-proofing is a prudent course of action and one which UKFraud helps with but of course no-one has a crystal-ball.

“As there are already so many new technology developments in mobile payments and m-commerce in general, we still haven’t seen a ‘full-on’ response from some of the main traditional ‘payment’ organisations yet. Equally, outside of  the excellent steps being taken by the European Payments Council, there is not enough heard from governments and regulators relating to governance of the sector, controls and requirements for eMoney, enforcement direction or  strengthening of the Money Laundering requirements to cover the sector. We are confident though that The European Payments Council will take a strong lead here soon.

“Fortunately, the recent launches by sector leaders such as Google and Apple have had extremely positive impact and have influenced the market greatly for the better. Our aim in recognising both the beneficial impact of recent market developments and the prospect of announcements from Europe will help other organisations navigate the best route forward for their products, thereby helping them reduce the risks of their own solutions within the broader mobile solutions and mobile ‘wallet’ space.”

News Source