Response to discussion on RTS on strong customer authentication and secure communication under PSD2
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On the other hand, this raises the issue of security of the hardware and software i.e. currently no common EU level standards exist for mobile payments. Recent recommendations on ‘Mobile and card-based contactless payments’ issued by the Euro Retail Payments Board, if properly implemented, should contribute to remedy this issue.
Another element to take into account is the need to ensure that these new technologies fully comply with the European data protection standards, recently reviewed in the context of the General Data Protection Regulation. Connected devices must integrate the principle of privacy at an early production stage to prevent that sensitive data such as financial data is misused.
For example, many consumers complain that their credit card gets blocked by the issuer when making payments outside the EU, sometimes without any prior notice. Getting the card unblocked is usually a huge inconvenience and has a cost for the consumer, not to mention the fact that the consumer may run out of money and his holiday or business trip may be put at risk. It can lead to major consumer detriment.
Therefore, behavior-based characteristics could be used as a complementary tool in the context of strong authentication and should in any case involve human intervention on behalf of the payment service provider. Whenever the PSP considers blocking a payment instrument upon suspicion of a fraudulent transaction:
. The PSP should immediately contact the consumer to check whether the transaction had been authorized or not;
. The responsibility on reaching the customer should lie on PSPs and there should be penalties if they do not;
. The procedure for unblocking the payment instrument should be available 24/7 and easy to reach from anywhere around the world;
. The procedure for unblocking the payment instrument should be based on advanced identification and security check, which should be easy to fulfil on the one hand from abroad but enough to ensure authenticity on the other.
In the context of authentication services it is also essential that consumers’ data is secure and that in case of data breaches, there are effective redress mechanisms in place in compliance with the new data protection rules.
Referring specifically to recurring direct debits, in our view, strong authentication with dynamic linking is possible. For example, according to the e-mandate solution developed by the European Payments Council, the consumer has to log into his online banking account (using his personal security credentials and strong authentication with dynamic linking) and then approves that the direct debit mandate was issued by a specific third party payee.
Since then fraudsters have mostly moved to the remote space which is by definition less secure, as the payer and payee do not see each other. For example, when making an online credit card payment, the cardholder enters his card number, expiration date and security number on the back of the card (CVV number). Fraudulent transactions using stolen cards, skimming and phishing techniques are therefore possible where security checks (strong authentication) are not performed by merchants and PSPs.
We consider that preventive measures are very important for all payment transactions and any possible exemptions must be duly substantiated. We also acknowledge the importance of convenience, e.g. consumers are usually not required to type their PIN code for low value face-to-face contactless payments.
The PSD2 aims to better protect consumers against fraudulent transactions where the consumer has not acted fraudulently or has not committed gross negligence. Yet in reality consumers often face difficulties in obtaining quick redress, as some PSPs tend to shift the liability to the consumer.
A major security concern relates to the operating model where PIS come into possession of the consumer’s personalized security credentials to access his bank account. This threatens consumer security and privacy and by far exceeds the objective, which is to receive payment authorization and payment guarantee for a specific payment transaction.
DECO considers that the consumer’s personalized security credentials should not be accessed by any third party, including PIS/AIS.
In addition, we would not be in favour of PIS/AIS developing new sets of personalized security credentials, identification and authorization procedures. That would add more confusion for consumers.
1. With respect to Article 97(1) (c), are there any additional examples of transactions or actions implying a risk of payment fraud or other abuses that would need to be considered for the RTS? If so, please give details and explain the risks involved.
In our view, there should be strong customer authentication requirements for mail orders and telephone orders. These transactions use remote channels, and, a priori, imply the same risk of payment fraud as other remote transactions, including electronic ones. Therefor we don´t see any valid reason for exempting mail and telephone orders from the scope of the Regulatory Technical Standards. Specific types of strong customer authentication could be considered for non-electronic remote transactions.2. Which examples of possession elements do you consider as appropriate to be used in the context of strong customer authentication, must these have a physical form or can they be data? If so, can you provide details on how it can be ensured that these data can only be controlled by the PSU?
DECO considers that, physical objects such as chip cards and smartphones are appropriate to be used in the context of strong customer authentication. For example, there are already solutions on the market that allow using factor authentication. Such solutions are especially well adapted for mobile payment transactions, as the user does not have to carry additional hardware token around while, at the same time, strong authentication requirements can be met.On the other hand, this raises the issue of security of the hardware and software i.e. currently no common EU level standards exist for mobile payments. Recent recommendations on ‘Mobile and card-based contactless payments’ issued by the Euro Retail Payments Board, if properly implemented, should contribute to remedy this issue.
Another element to take into account is the need to ensure that these new technologies fully comply with the European data protection standards, recently reviewed in the context of the General Data Protection Regulation. Connected devices must integrate the principle of privacy at an early production stage to prevent that sensitive data such as financial data is misused.
3. Do you consider that in the context of “inherence” elements, behaviour-based characteristics are appropriate to be used in the context of strong customer authentication? If so, can you specify under which conditions?
Behavior-based strong customer authentication is already being performed by payment service providers such as card schemes. Those techniques may be efficient to detect irregular transactions and prevent the risk of fraud, for example, where the transaction is initiated from an unusual place, country or IP. On the other hand, users are sometimes unfairly penalized due to automated behavior-based techniques.For example, many consumers complain that their credit card gets blocked by the issuer when making payments outside the EU, sometimes without any prior notice. Getting the card unblocked is usually a huge inconvenience and has a cost for the consumer, not to mention the fact that the consumer may run out of money and his holiday or business trip may be put at risk. It can lead to major consumer detriment.
Therefore, behavior-based characteristics could be used as a complementary tool in the context of strong authentication and should in any case involve human intervention on behalf of the payment service provider. Whenever the PSP considers blocking a payment instrument upon suspicion of a fraudulent transaction:
. The PSP should immediately contact the consumer to check whether the transaction had been authorized or not;
. The responsibility on reaching the customer should lie on PSPs and there should be penalties if they do not;
. The procedure for unblocking the payment instrument should be available 24/7 and easy to reach from anywhere around the world;
. The procedure for unblocking the payment instrument should be based on advanced identification and security check, which should be easy to fulfil on the one hand from abroad but enough to ensure authenticity on the other.
4. Which challenges do you identify for fulfilling the objectives of strong customer authentication with respect to the independence of the authentication elements used (e.g. for mobile devices)?
As regards remote card payments, currently strong authentication using 3-D Secure varies across banks and countries: in some cases the one-time security code is generated by a card reader provided by the bank, while in some other cases the security code is texted to the consumer’s mobile phone number. This lack of harmonization provides consumers with an inconsistent experience. Besides that, BEUC members raised the issue of risks related to sending the security code via SMS, which is not perceived as a secure communication channel.In the context of authentication services it is also essential that consumers’ data is secure and that in case of data breaches, there are effective redress mechanisms in place in compliance with the new data protection rules.
5. Which challenges do you identify for fulfilling the objectives of strong customer authentication with respect to dynamic linking?
There are possibly some scenarios in which a requirement for dynamic linking for the initiation of a transaction might be difficult to implement for various reasons. We agree that exemptions for such cases could be considered.Referring specifically to recurring direct debits, in our view, strong authentication with dynamic linking is possible. For example, according to the e-mandate solution developed by the European Payments Council, the consumer has to log into his online banking account (using his personal security credentials and strong authentication with dynamic linking) and then approves that the direct debit mandate was issued by a specific third party payee.
7. Do you consider the clarifications suggested regarding the potential exemptions to strong customer authentication, to be useful?
The clarifications suggested by EBA regarding the potential exemptions to strong customer authentication are useful. The PSD2 aims to make sure that all electronic payment services are carried out in a secure manner. For face-to-face payments (by card), Europe adopted the Chip and PIN standard a few years ago, which considerably reduced the levels of fraud in those transactions.Since then fraudsters have mostly moved to the remote space which is by definition less secure, as the payer and payee do not see each other. For example, when making an online credit card payment, the cardholder enters his card number, expiration date and security number on the back of the card (CVV number). Fraudulent transactions using stolen cards, skimming and phishing techniques are therefore possible where security checks (strong authentication) are not performed by merchants and PSPs.
We consider that preventive measures are very important for all payment transactions and any possible exemptions must be duly substantiated. We also acknowledge the importance of convenience, e.g. consumers are usually not required to type their PIN code for low value face-to-face contactless payments.
8. Are there any other factors the EBA should consider when deciding on the exemptions applicable to the forthcoming regulatory technical standards?
A good level of protection for consumers of payment services is provided through an adequate combination of preventive and curative measures. Providing a hassle-free and unconditional refund in case of unauthorized, fraudulent and disputed payment transactions is a precondition necessary to help reassure consumers in retail payments and contribute to innovation, convenience and smooth payment experience.The PSD2 aims to better protect consumers against fraudulent transactions where the consumer has not acted fraudulently or has not committed gross negligence. Yet in reality consumers often face difficulties in obtaining quick redress, as some PSPs tend to shift the liability to the consumer.
11. What other risks with regard to the protection of users’ personalised security credentials do you identify?
DECO welcomes the fact that the previously unregulated third-party payment initiation service and account information service providers (PIS and AIS) have been brought under the scope of the PSD2. PIS will have to comply with a number of requirements as regards their registration and licensing, strong customer authentication, authentication vis-à-vis the consumer’s bank, and liability in case of payment incidents. The liability requirements related to PIS under the PSD2 are very consumer friendly: in case of an unauthorized transaction, the consumer will be entitled to get the refund from his bank; the ultimate liability for the fraudulent transaction will be addressed between the consumer’s bank and the PIS.A major security concern relates to the operating model where PIS come into possession of the consumer’s personalized security credentials to access his bank account. This threatens consumer security and privacy and by far exceeds the objective, which is to receive payment authorization and payment guarantee for a specific payment transaction.
DECO considers that the consumer’s personalized security credentials should not be accessed by any third party, including PIS/AIS.
15. For each of the topics identified under paragraph 63 above (a to f), do you consider the clarifications provided to be comprehensive and suitable? If not, why not?
DECO supports the approach proposed by EBA with respect to common and secure open standards of communication between account servicing payment service providers (banks), AIS and PIS providers, payers, payees and other service providers.In addition, we would not be in favour of PIS/AIS developing new sets of personalized security credentials, identification and authorization procedures. That would add more confusion for consumers.