Barclays has designed its system in accordance with standards issued by the payment association APACS. Barclays says it will be the first deployment of its kind in the UK for personal banking customers. By conforming to the APACS standard the reader can be used as part of any system also using those standards. Not all chip and PIN cards conform to the standard at present.
In July the bank will begin sending half a million card readers to its home users. It is not charging customers for the devices, which it is calling PINsentry. They will be compulsory for those who wish to transfer money to third party bank accounts.
"The remaining customers will not need PINsentry at this stage – it will only be needed by those who use online banking to set up payments out of their account to a new third party for the first time," said a Barclays statement. "Customers who simply wish to use online banking to view their accounts and pay bills or established payees will be able to continue to use online banking as normal without the need for PINsentry."
A Barclays spokeseman told OUT-LAW that the card readers, manufactured by Dutch security specialist Gemalto, will be sent to other customers who request one, even if they do not transfer money to third party bank accounts.
First transactions to third party accounts are being targeted for extra security because that is the outlet for any stolen money should a thief break into someone's online bank account.
When a customer inserts a card into the PINsentry reader and enters the correct PIN, the device will generate an 8-digit number. That number must be typed in to the bank's website. For security, the card reader will not connect to a computer. For visually-impaired users, a larger card reader will be available that includes a loud speaker and a headphone jack.
PINsentry users will be asked to enter the 8-digit number at login, even just to view account details. This means that to access their account details at work, customers must carry the readers with them. Upon instructing a transfer to a third party account for the first time, the user will be asked to generate another number and enter that number too.
Barclays' approach addresses the threat of a 'man-in-the-middle' attack. In such attacks an email purporting to come from Barclays is sent to a customer, encouraging that person to visit the fraudster's website, which will be a copy of Barclays' genuine site. The customer might enter a number generated by PINsentry upon request and the fraudster – i.e. the man in the middle – immediately keys that number into the genuine site. This lets the attacker view the victim's account balance. But money transfers are impossible unless, in the same visitor session, the attacker obtains another PINsentry-generated number. Asking for a second PINsentry number is more likely to raise the account holder's suspicions.
The Barclays spokesman confirmed that the device would be compatible with other systems, including other banking systems. "It is future proof. It is ready for use in other systems," he said. "It is also ready for other kinds of security, so it has other buttons on it that are not used just now but can be used for things like challenge and response security."
Four customers of Dutch bank ANB Amro lost money in man-in-the-middle attacks, it emerged earlier this week. The bank uses a two-factor authentication system but its number-generating fobs were required at the point of login only. The bank compensated its consumers for undisclosed losses.
APACS also confirmed that the Barclays device will be usable by security systems other than Barclays'. "The reasoning behind that is because research into the card market shows that we have on average four cards each, and in a few years' time we don't want a situation where we have four different card readers and we have to work out which one to use," said Mark Bowman, spokesman for APACS.
"Any reader can read any card," said Bowman of readers that follow the APACS standards. "It is mix and match." The system is expected to be adopted by some retailers as well as by other banks as online payment firms look to make systems ever more secure.