Will Target Credit Card Disaster be the Tipping Point for Mobile Banking?

By Doug Mohney December 26, 2013

Target has managed to become the poster child for security ire, having lost around 40 million credit and debit cards. It's the latest documented breech of credit card security. Financial institutions have to be thinking how to migrate away from the increasingly exploited system of numbers, plastic and mag stripes, especially as lawsuits start arriving.

Credit card authentication has been lame for years, as my numerous credit card replacements over the past 24 months can attest.  A card is swiped or entered in on line, sometimes accompanied with a three (yes, 3 whole digits) security authorization number on the back.  The card number is run against a database to confirm the security authorization number along with the purchase amount -- mostly to see if you are up against your credit limit, and a cursory geographic check if it is an in-person purchase.   On-line purchases get scrubbed a bit more carefully with looks at with IP addresses and purchasing websites due to the anonymous nature of the Internet, but that's about the extent of additional verification.

For years, telecom carriers have dreamed about holding the mobile wallet, and fumbled through various iterations of offering financial services. The latest variation on the theme has been using NFC (near-field communications) to enable touch-payments with (presumably) better security.  On a larger scale, the phone can provide multiple physical bits to authenticate with including Wireless MAC address, IP address on a network, and phone number. 

The trick to more secure payments is combining the existing financial credit card verification system with the mobile world while keeping both sides separated as much as possible.  The credit/debit card industry would hold one authentication "keys" and the mobile phone network would hold the other one or ones.  Making a purchase would require the phone and credit card information.  In theory, the credit card numbers could/would reside on the phone, with separate processes validating the two pieces at the point of sale. A phone could be stolen, but only one phone or two phones would be uniquely mapped to a small set of accounts.

Further security could be encouraged by keeping credit card numbers separate from the phone, using a mag card swipe and a NFC tap or some other mechanism  (WiFi MAC query) to provide two-factor authentication with card and phone.  Additional protection is provided by keeping cards and phone separate; if one is lost, the other one can provide some funds while limiting bigger purchases and/or subject to increased scrutiny.

The final step in the process may be in providing multi-factor biometric authentication at point of sale.  Voice and finger prints may be possibilities, but a simple photograph of the card holder might be better and harder to defeat.  Rolling in face detection could provide a better -- but a bit more costly -- solution for kiosk sales, self-checkout and busy lines. 

Edited by Cassandra Tucker

Contributing Editor

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