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A blog on financial markets and their regulation
I am a strong supporter of two factor authentication (2FA), and I welcomed the idea of a one time password sent by SMS when it was introduced in India a few years ago. But gradually I have become disillusioned because SMS is not true 2FA.
Authentication is a problem that humanity has faced for centuries; and long before computers were invented, several authentication methods were developed and adopted. Two widely used methods are nicely illustrated by two different stories in the centuries old collection Arabian Nights. The first method is to authenticate with something that you know like Open Sesame in Ali Baba and the Forty Thieves. The Ali Baba story describes how the secret password is easily stolen during the process of authentication itself. What is worse is that while we would quickly detect the theft of a physical object, the theft of a secret password is not detected unless the theft does something stupid like Ali Baba’s brother did in the story.
The second method is to authenticate with something that you have, and its problems are eloquently portrayed in the story about Aladdin’s Wonderful Lamp. In the Aladdin story, the lamp changes hand involuntarily at least four times; physical keys or hardware tokens can also be stolen. The problem is that while you can carry “what you know” with you all the time (if you have committed it to memory), you cannot carry “what you have” with you all the time. When you leave it behind, you may (like Aladdin) find on your return that it is gone.
Clearly, the two methods – “what you know” and “what you have” – are complementary in that one is strong where the other is weak. Naturally, centuries ago, people came up with the idea of combining the two methods. This is the core idea of 2FA – you authenticate with something that you have and with something that you know. An interesting example of 2FA can be found in the Indian epic, the Ramayana. There is an episode in this epic where Rama sends a messenger (Hanuman) to his wife Sita. Since Hanuman was previously unknown to Sita, there was clearly a problem of authentication to be solved. Rama gives some personal ornaments to Hanuman which he could show to Sita for the “what you have” part of 2FA. But Rama does not rely on this alone. He also narrates some incidents known only to Rama and Sita to provide the “what you know” part of 2FA. The Ramayana records that the authentication was successful in a hostile environment where Sita regarded everything with suspicion (because her captors were adept in various forms of sorcery).
In the digital world, 2FA relies on a password for the “what you know” part and some piece of hardware for the “what you have” part. In high value applications, a hardware token – a kind of electronic key – is common. While it is vulnerable to MitM attacks, I like to think of this as reasonably secure (maybe I am just deluded). The kind of person who can steal your password is probably sitting in Nigeria or Ukraine, while the person who can steal your hardware must be living relatively close by. The skill sets required for the two thefts are quite different and it is unlikely that the same person would have both skill sets. The few people like Richard Feynman who are equally good at picking locks and cracking the secrets of the universe hopefully have better things to do in life than hack into your bank account.
The SMS based OTP has emerged as the poor man’s substitute for a hardware token. The bank sends you a text message with a one time password which you type in on the web site as the second factor in the authentication. Intuitively, your mobile phone becomes the the “what you have” part of 2FA.
Unfortunately, this intuition is all wrong – horribly wrong. The SMS which the bank sends is sent to your mobile number and not to your mobile phone. This might appear to be an exercise in hair splitting, but it is very important. The problem is that while my mobile phone is something that I have, my SIM card and mobile connection are both in the telecom operator’s hands and not in mine.
There have been cases around the world where somebody claiming to be you convinces the telecom operator that you have lost your mobile and need a new SIM card with the old number. The operator simply deactivates your SIM and gives the fake you a new SIM which has been assigned the old number. If you think this is a figment of my paranoid imagination, take a look at this 2013 story from India and this 2011 story from Malaysia. If you want something from the developed world, look at this 2011 story from Australia about how the crook simply went to another telecom operator and asked for the number to be “ported” from the original operator. (h/t I came across all these stories directly or indirectly via Bruce Schneier at different points of time). I have blogged about this problem in the past as well (see here and here).
My final illustration of why the SMS OTP that is sent to you is totally divorced from your mobile phone is provided by my own experience last week in Gujarat. In the wake of rioting in parts of the state, the government asked the telecom operators to shut down SMS services and mobile data throughout the state. I needed to book an air ticket urgently one night for a visiting relative who had to rush back because of an emergency at home. Using a wired internet connection, I could login to the bank site using my password (the “what I know” part of 2FA). The mobile phone (the “what I have” part of 2FA) was securely in my hand. All to no avail, because the telecom operator would not send me the SMS containing the OTP. I had to call somebody from outside the state to make the payment.
This also set me thinking that someday a criminal gang would (a) steal credit cards, (b) engineer some disorder to get SMS services shut down, and (c) use this “cover of darkness” to steal money using those cards. They would know that the victims would not receive the SMS messages that would otherwise alert them to the fraud.
I think we need to rethink the SMS OTP model. Perhaps, we need to protect the SIM with something like a Trusted Platform Module (TPM). The operator may be able to give away your SIM to a thief, but it cannot do anything about your TPM – it would truly be “something that you ” have. Or maybe the OTP must come via a secure channel different from normal SMS.