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PayPal Two-Factor Authentication Broken
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macker490
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macker490,
User Rank: Ninja
6/25/2014 | 8:34:44 AM
corrected point of sale process
Fixing the Point of Sale Terminal (POST)

THINK: when you use your card: you are NOT authorizing ONE transaction: you are giving the merchant INDEFINITE UNRESTRICTED access to your account.

if the merchant is hacked the card numbers are then sold on the black market. hackers then prepare bogus cards -- with real customer numbers -- and then send "mules" out to purchase high value items -- that can be resold

it's a rough way to scam cash and the "mules" are most likely to get caught -- not the hackers who compromised the merchants' systems .


The POST will need to be re-designed to accept customer "Smart Cards"

The Customer Smart Card will need an on-board processor, -- with PGP

When the customer presents the card it DOES NOT send the customer's card number to the POST.  Instead, the POST will submit an INVOICE to the customer's card.  On customer approval the customer's card will encrypt the invoice together with authorization for payment to the PCI ( Payment Card Industry Card Service Center ) for processing and forward the cipher text to the POST

Neither the POST nor the merchant's computer can read the authorizing message because it is PGP encrypted for the PCI service.  Therefore the merchant's POST must forward the authorizing message cipher text to the PCI service center.

On approval the PCI Service Center will return an approval note to the POST and an EFT from the customer's account to the merchant's account.

The POST will then print the PAID invoice.  The customer picks up the merchandise and the transaction is complete.

The merchant never knows who the customer was: the merchant never has ANY of the customer's PII data.

Cards are NOT updated.  They are DISPOSABLE and are replaced at least once a year -- when the PGP signatures are set to expire.  Note that PGP signatures can also be REVOKED if the card is lost.

Transactions are Serialized using a Transaction Number ( like a check number ) plus date and time of origination.    This to prevent re-use of transactions.   A transaction authorizes one payment only not a cash flow.

~~~
Kelly Jackson Higgins
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Kelly Jackson Higgins,
User Rank: Strategist
6/25/2014 | 8:37:57 AM
Re: corrected point of sale process
The "good news" here is that PayPal is working on a fix. In the meantime, 2FA is disabled for mobile, so authentication is old-school for now with iOS and Android.
Marilyn Cohodas
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50%
Marilyn Cohodas,
User Rank: Strategist
6/25/2014 | 9:08:52 AM
Re: corrected point of sale process
Kelly, to your knowledge, how common are 2FA flaws? Is this the next big thing?
Kelly Jackson Higgins
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Kelly Jackson Higgins,
User Rank: Strategist
6/25/2014 | 9:10:29 AM
Re: corrected point of sale process
Hmmm...good question. I'm not aware of any others (but that doesn't mean there haven't been any), and Duo Security says they expect to find similar issues in other mobile apps.
Marilyn Cohodas
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50%
Marilyn Cohodas,
User Rank: Strategist
6/25/2014 | 10:14:12 AM
Re: corrected point of sale process
Sounds like something to keep on the radar...
BurgessCT
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50%
BurgessCT,
User Rank: Apprentice
6/25/2014 | 11:45:17 AM
Re: corrected point of sale process
Good piece Kelly - my question is did PayPal roll-their-own 2FA or did this flaw come from a partner's implementation of 2FA for the application?  

Context - I and other small business owners lack the resources of a company like (ebay/paypal) and thus recognizing the level of effort to roll-your-own for a good 2FA is important.

Thanks for the piece, Duo's commentary is much appreciated.
Kelly Jackson Higgins
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50%
Kelly Jackson Higgins,
User Rank: Strategist
6/25/2014 | 12:44:51 PM
Re: corrected point of sale process
Great question, @BurgessCT. PayPal didn't say, but they are taking responsibility for the patch. 
securityaffairs
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50%
securityaffairs,
User Rank: Ninja
6/25/2014 | 6:45:18 PM
Re: corrected point of sale process
The flaw is related to PayPal implementation for mobile platforms of 2FA mechanism.

Concerning it the time that will pass until the planned final fix (July).

Anyway PayPal has already implemented a temporary fix to protect its customers properly managing the session token and to avoid attackers to transfer victim's money.

 


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