Extending the Franchise of Trust to the Mobile Channel Financial Institutions, Mobile Finance, and the Hard Problems Ahe

1. Extending the Franchise of Trustto the Mobile ChannelFinancial Institutions, Mobile Finance, and the Hard Problems Ahead Zachary Tumin Executive Director, FSTC April 1, 2003

2. Contents (More or Less) • The Vision • The Challenge • The Requirements • The View From Planet Earth (Banks) • The Prospect Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

3. About FSTC • Consortium of leading US financial institutions and technology companies bringing forward secure, reliable, interoperable technologies in proof, test, and pilot • Active initiatives underway in: web services, disaster recovery/business continuity, voice and biometrics authentication, payments system innovation, check security and imaging • FI members include: Citigroup, JPMorgan Chase, Bank of America, Wells Fargo, National City, Fidelity, BB&T, Comerica, Zions, Huntington, Wachovia • Technology members include: IBM, Sun Microsystems, Computer Associates, Hewlett Packard, Diebold, Unisys, Sungard, Motorola • See projects, membership at: www.fstc.org... Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

4. VISION STUFF: Where We Could Be and Where We Are Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

5. The Current Landscape: Vision of the Mobile Channel for Financial Services • A fully connected world • All communicate with all instantly • From anywhere, to anyone or any service • All types of transactions • Utilizing small devices easily carried or worn • Trusted, secure, reliable – just like all the other channels Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

6. The Current Landscape: Multiple Channels, All Trusted (More or Less) • The bar of perception is set high for the mobile channel, benchmarked against current trust, reliability, security in other proven channels: • Branch (Teller) • Telephone (Voice) • US Mail (Letter Carrier) • ATM (Networks) • On-Line (Web) • Can still be pretty variable across and within, but… • No surprises here: Financial institutions and consumers think they have fully documented the inventory of risk for each channel, mitigated them (FIs) and accepted them (consumers), and made their choice of comfort and convenience • Mobile???? Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

7. The Current Landscape: Multiple Channels, All Trusted (More or Less) • For the consumer, trust, reliability, security = KNOWLEDGE • …where your money is • …how much is there • …who can do what with it (no one except you) • …how you can get to it and do things with it (walk, punch, surf) • …what to do if there’s a problem • Not: “I think,” but: “I know” • Tremors/channel confusion exist, rattle trust: e.g.: balance disparities irk, bug, bother, but… • Can mobile services – post- Dot.Com hype, just another channel – ever come close? When? What investments should financial institutions make next? Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

8. Mobile Financial Services Taxonomy: Transactions • Registrations for Financial Service Credentials • Mobile Electronic Payments (mPayments) • Withdrawal of Electronic Cash to Mobile Devices • Secure Delivery of Financial Documents • Financial Transaction Authorizations (Source: FSTC and BITS) • Account Balance Inquires and Inventory (Pull) • Transaction Initiation and Execution (Pull) • Data Message Exchange • Personalized Alerts (Push) • Account Service (Push and Pull) • Wireless Information Synchronization • Portal Information Access • Aggregation Services (Push and Pull) • Promotion Cross Selling (Push and Pull) • Financial Advice (Push and Pull) • Bill Presentment and Payment (Pull) • Loan Application/Prequalification • Mobile Commerce (Push and Pull) • Location Based Financial Services (Push and Pull) • E2E Marketplace Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

9. Mobile Financial Service Taxonomy: Scenarios • Mobile User to Financial Institution • Mobile User to Physical ATM or PoS Terminal • Mobile User to Cyber Merchant • Mobile User to Mobile User Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

10. Mobile Communications: Options for Financial Service Delivery • via Immediate Proximity Communications (RFID, infrared) • via Wireless LANS (e.g., 802.11) • via Public Wireless Carrier • via Intermediate System (e.g. POS system) • via Mobile Platforms (cars, planes, trains) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

11. Use of the Mobile Channel: The Observed As-Is (What the FIs See) • Customers not clambering for mobile finance • Low: Fewer than 1% of leading brokerages have rolled out wireless services • High interest by PDA users; ownership 5% of which 25% interested • Low interest by cell phone users; ownership 39% of which 5% interested • Pagers: small ownership 7%, low interest • Experience in Britain: Of the 3MM Britons with a WAP phone, only 100K signed up for WAP services • 590 millions GSM users worldwide - 30 Billion SMS messages; projection - over 100 Billion SMS messages per month for the next two years (Source: Gartner, Forrester) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

12. Where We Stand/As-Is From Financial Institution’s Perspective • As far as the mobile channel is concerned: • Primary appeal is anytime, anywhere access to accounts • Lack of urgency plagues all devices • Most consumers not very interested, although they seem technologically prepared • Most do not consider financial transactions urgent enough to execute on a mobile device • Primary interest via traders - checking portfolios (Stock quotes #1); Low priority: Loan and bill payments • WAMU - Use of wireless in branches (Source: Forrester) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

13. Factors Contributing to a Lack of Zeal for the Mobile Channel • In sum: Happiness with other channels; doubts about this one • Issues of service/connection quality • Device friendliness • Bandwidth constraints • Security holes and glitches • User expectations: criteria to use service: urgency, simplicity, frequency • Privacy, Security - impact of losing cell phone, spoofing, ID theft • Usability - screen size • Cost of service Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

14. The Mobile Landscape From the Industry Perspective: Yet Immature • Rapid product evolution—The pace of development in personal devices, makes it very difficult to build new mCommerce or mobile financial applications on platforms that are changing radically • Confused approaches to security— there is little industry agreement on where security functionality should reside, or who should be responsible for managing security at a systems level. • Delivering PKI services - slow to emerge … who will offer PKI services, or will there be overlapping PKI service realms? • Government impact on security developments— different governments may have radically different views on about how security gets deployed and utilized in mobile services • Jurisdictional concerns— complicated in a world where transactions can take place even while one party is traversing a border. • Lack of industry coordination - The necessary working arrangements between the equipment vendors, wireless carriers, software developers and financial institutions have yet to come together. • Competing technical approaches— 802.11 wireless LANs, 3G cellular, Bluetooth, and IrDA have overlapping capabilities, and increasingly compete in the marketplace. • Global scale— Financial services can no longer be restricted to national markets—just as users want their cell phones to work in every country, they will certainly expect their electronic wallets to work wherever they travel. • Immature mCommerce standards—mCommerce standards are even less well developed than eCommerce Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

15. For Many Financial Institutions Today: Definitely a “Hold” Recommendation • Technology still immature • WAP - poor connections, difficult to use devices • GPRS impact not until 2004; low bandwidth • G2.5 available; G3 still in development - 16 times GPRS; availability 5 years out. • Security, reliability, interoperability persist as issues • No killer app • No burning platform • No competitive differentiation possible • Unclear value proposition Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

16. The Coming Landscape • The mobile landscape will soon be changing. • Service/connection quality and bandwidth will improve as GPRS networks emerge, followed by G2.5 and G3. • PDA-like mobile devices will provide greater computing capacity and ease of use for mobile transactions. • As hard drives, batteries, and global roaming capabilities expand, the promise of anywhere/anytime computing will materialize. • By 2010, for example, research firms estimate that large segments – some say as high as 75% of European and American users – will carry wireless computing and telecommunications devices. Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

17. The Challenge Thing: What’s Possible, Practical, and Expectable Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

18. The Challenges That Remain: What will it take to get traction in mobile financial services? Operating (Performance) Requirements for Mobile Financial Services: Networks (Equally long list for: software and devices) • Ubiquity of coverage (outdoor and indoor, rural and urban) • High transmission rates (144kb/s per active end user, 300-400 kb/s for moving (non-stationary) end-users • Device agnostic (end-user) • Interoperability among carriers – transparent, seamless services (application look the same; service uninterrupted) • End-to-end secure at the application level • Support for mobile transactions – maintain service and session continuity • Mobile apps should meet high-level wireless network performance requirements – call blocking rate, call dropping rate, hand over failure rate, frame error rate: ALL < 1% (Source: BITS) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

19. Why This is Hard: Five Pillars of Security • Authorization: Establish that the other party is authorized to use the credentials being presented – see first: registration; credentialing • Authentication: The ability for a party to utilize their credentials to confirm their authorization of a transaction – see, first: digital signatures • Integrity (message): The ability to prevent or detect modification of transactions after they have been authorized • Confidentiality (message): All financial transactions must be protected from unauthorized disclosure • Non-Repudiation: Detecting and preventing parties from denying their participation in transactions – see, first: logging, audit, forensics • (After we’re finished with this: Reliability, Interoperability, Consumer Acceptance…) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

20. Summing Up: The BITS Group’s Challenge • “One important consequence of the security scenario described above is that the wireless network operator should permit an end-to-end security solution to be imposed at the mobile application level. The wireless network should not expose any transaction or identifying details of the information flows for secure end-to-end mobile applications. This means that the individual customer's identity, all transaction records, all password, and all authentication and authorization sequences should pass through the wireless carrier's network intact, without decryption. It should not be possible to record and decode this confidential information, either by listening to wireless channels with commercial radio frequency scanner, by tapping into wired portions fo the network operator's core network, or by recording packet sequences or information that is stored temporarily in gateways or switches that are part of the wireless network.” Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

21. Deconstructing Authentication/Gap Analysis: As-Is • It’s been defined, particularly in consumer purchasing: PIN/Password • Somewhat restrictive and device dependent • High security is device dependent, the least secure PIN is not device dependent but is insecure • An interruption of the experience of online buying, etc.– disruptive • Overhead of managing certificate/ people ignore/ validity disappears/fatigue sets in/no one cares • Static state—“depth of our relationship is defined by this security level for this particular transactions” (Source: FSTC) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

22. Authentication: To-Be • Ubiquitous • Needs to be obvious to whoever needs to know it – can’t be an assumed activity • Needs to be seamless • Needs to be evolutionary, dynamic negotiation of security levels for particular transactions, needs to grow as the relationship between the two entities grow • Must cover all players within the transaction (each member of the transaction needs to be covered in the authentication)…each party, all parties to the transaction must be authenticated • Needs to be modular • Needs to be extensible Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

23. Authentication: Gap • High overhead, requires too much maintenance, everything is password dependent; I have to manage the new account relationship • Levels of trust could be communicated across parties • Problems in the chain of trust; different authentications; how do you pass that trust around; risk of illigitimate/incorrect/mis-authentication Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

24. Authentication: Action • Build a system that will be a single source authentication system that is secure • Manage the scaleable distributed delegation of trust • Create a protocol between that allows the negotiation of a security or trust level for a particular transaction type • Put a standard API around it …expose that to a web services API for authentication and authorization Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

25. Authentication: Benefits • Methodology reduces cost prohibitive nature of authentication • Increases reliability/interoperability of authentication • Leverages existing and future authentication capability • Allows delegation of authentication and authorization Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

26. Why This is Hard: Bringing the Five Pillars Together WITH Interoperability Imagine a Statement of Work….To Implement, Test and Validate an Authentication and Security Framework for Mobile Financial Services That: • Provides secure authentication services, accessible at the end points of the network, not built into the network • Can work over unreliable, insecure networks • Can be accessed by any number of devices, ranging from ID RF Tags, to palm devices, to PC's, to servers • Can support a number of autonomous and distributed, but trusted, authentication services that can interoperate and cooperate • the authentication services include: certifying various attributes of both personal and corporate profiles, as well as electronic documents • Assures that the information and certification is handled, transmitted, shared and stored according to the FTC privacy principles Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

27. …not finished yet: SOW continued • Where the certification of a single individual or corporation can split their attribute certification across different authentication services (e.g. enrolled college student - university; bank account – financial institution; health - doctor) • The system is robust and able to operate under denial of service attacks, viruses, system failures, etc. • That system risks and compromises are manageable • Where system is technology neutral - not dependent upon any particular authentication technology or encryption technology, but can support all current prevailing models and accommodate future technologies (Source: FSTC) Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

28. The Promise Thing: Where FIs See This Thing Headed – Compared to Everything Else They Have To Worry About Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

29. Evaluating and Comparing Competing Alternatives for FI Attention and Investment Dan Schutzer of Citigroup/FSTC: “Although no one can predict with certainty which innovations will succeed and which will fail, certain attributes can provide insights into their likelihood of success. The innovation is more likely to succeed if: • The channelsit opens up are heavily used, is experiencing high growth, but [e.g.,payments] over the channel are not yet established. • The innovation addresses current shortcomings. • The innovation is perceived to offer value. • The technology and business innovations are intuitive to use and does not require behavioral change. • The technology is not overly costly or complex to implement. Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003

30. More… • Contact: Zachary Tumin EXECUTIVE DIRECTOR Financial Services Technology Consortium 44 Wall Street, 12th Fl. New York, NY 10005 www.fstc.org zachary.tumin@fstc.org V: 914-576-7629 F: 978-336-8302 Trust and Dependability in Mobile, Wireless, and Pervasive Computing Environments | April 1, 2003