Visa Europe Will Use Geolocation To Fight Fraud, But Is That Enough?

The search for the perfect payment-card authentication scheme goes on. Last month, Visa Europe cut a deal with an Irish security vendor called ValidSoft to verify the identity of cardholders by matching up a card user's location with the location of his/her mobile phone.

ValidSoft gets the phone's locale directly from the mobile carrier; if the phone is in England and someone tries to use the payment card at a German retailer, that will set off a fraud alert almost instantly.

Gartner Analyst Avivah Litan thinks that within five years, at least 15 percent of all payment-card transactions will be validated using mobile location. "After all, our mobile phone is practically tied to our umbilical cord—we rarely leave home without it. Visa knows it, and so do the rest of us. Why shouldn't it serve as a useful tool for preventing fraud against us?" she wrote in her Gartner blog.

That's all true—as long as everyone keeps in mind that using a mobile phone to confirm cardholder location still isn't the panacea that every retailer would love to have.

Let's leave aside the simplest, most obvious problems with tying a phone's location to a card's use. Yes, some people have multiple phones. Some people use different phones in different countries (admittedly, that's a more common problem in Europe than in the U.S.). Some people loan out their phones and still need to use their payment cards.

Short of building the card into a smartphone's digital wallet using NFC—a perfectly reasonable idea that mobile carriers, card companies and retailers have been fighting over for years—there's no guarantee that a customer's card and phone will always be in the same place.

But that's not the big problem; it's just an inconvenience. Most people only carry one mobile phone, and they'll learn soon enough if there's a problem using a payment card without that phone in hand.

The real challenge is that as soon as mobile location becomes the new standard for payment-card security, thieves will immediately begin probing for a new soft spot.

One possibility: Thieves could break into the systems of the vendor providing the mobile-location service (such as ValidSoft) and create a fake location for the mobile phone associated with a particular payment card. That's not impossible—some thieves have demonstrated they can drill deep into what should be hardened systems.But that would just be the start of the thieves' work. For example, ValidSoft says it can confirm a mobile phone's location in less than half a second. That means timing would have to be very tight for a thief who is trying to fake the phone's location. If the service that is providing mobile location switched to checking the phone's location multiple times in short order, thieves would have to use even more complicated techniques, and they'd no longer have surprise on their side.

If all that sounds like doing it the hard way—well, yes, it is. A security vendor's systems aren't usually the softest spots to target in an attack.

It would be much easier for a thief to make geolocation-based security practically useless just by generating phantom phones. It would still require the thief to know information about the mobile phone number associated with the payment card. But cloning a phone could be much easier than breaking through a security vendor's security.

If a ring of thieves set up a network of sites throughout the U.S. or Europe to act as bogus phones—and also put a cloned phone in the pocket of a thief using a stolen payment card—the mobile carrier wouldn't just register one location for the phone. It could appear to be in a dozen locations at once.

Then, when that information was passed to the location-based security vendor, it would be useless. Is that particular phone really in Denver, Detroit, Duluth or Des Moines? Can the vendor afford to ignore the false positives? How irritated will cardholders be if they're legitimately trying to use their payment cards and those cards are rejected? How long will it be before store associates start to routinely override those security alerts?

Once that happens, any security scheme that depends on the location of a cardholder's mobile phone is useless.

Sure, that phone-cloning approach would require plenty of technical sophistication and a certain amount of coordination. But it's doable, and it doesn't require an undetected break-in to a mobile carrier or a security company. As points of attack go, it's a pretty soft spot.

Of course, that doesn't mean it's a bad idea for Visa Europe to add mobile location to its security arsenal. Mobile location plus Chip-and-PIN plus signature verification starts to look like a healthy, multi-factor approach to cardholder authentication.

Just don't assume that mobile location will do the job all by itself.