Lawmakers on the Transportation Committee yesterday questioned the National Communications Commission’s (NCC) policy requiring two-way authorization when consumers make payments involving small sums of money over mobile devices, saying that it has proved to be ineffective in reducing fraud.
The two-way authorization system was established in response to reports of scams using text-messaging applications in recent years, which have resulted in financial losses for many customers.
According to the National Police Agency, hackers take advantage of Line and other text-messaging applications to distribute spam links, which contain Trojan horse viruses. Downloading data from the links can allow hackers to access personal information, including authorization numbers for purchasing mobile phone applications.
Hackers then use the stolen information to shop online and distribute fraudulent messages to a user’s lists of contacts.
Government statistics show that 272 cases of fraud were committed through text-messaging software last year, with financial losses of approximately NT$2.45 million (US$81,400). This year, the number of cases was 497 as of last month, with financial losses topping NT$3.15 million.
NCC Chairperson Howard Shyr (石世豪) said during his presentation that the function enabling small payments by customers can only be activated by users, adding that telecom carriers must not set the function to open without the customer’s authorization.
To make a micropayment, Shyr said the telecom carriers must send a text message requesting an authorization code and users must send a text message back to the carriers after they enter the code. The system should send another message to inform users that the authorization is complete, he said.
“If customers suffer losses because the carriers fail to set up this two-way authorization mechanism or because they preset the function as open, the loss must be covered by the carriers,” he said.
Democratic Progressive Party (DPP) Legislator Tsai Chi-chang (蔡其昌) questioned the effectiveness of the two-way authorization mechanism in curbing fraud.
“Hackers buy something online with the stolen information and ask the telecom carriers to allow for payment through a mobile device. Telecom carriers are supposed to send a message to the user requesting authorization. Because the hackers have ‘occupied’ users’ mobile phones through phishing messages, their mobile phones will automatically authorize such payment without the customer’s knowledge. Instead of a reduction in fraud, we are seeing a rise,” Tsai said.
Tsai added that the commission is considering improving the mechanism by requesting a code from customers to activate the function for making payments, which is similar to the method used when consumers authorize transactions by credit card.
DPP Legislator Yeh Yi-jin (葉宜津) said that the police agency has yet to solve a fraud committed via mobile messaging service Line because the messages sent over the application are encrypted, adding that because Line is an overseas firm, it is difficult to procure user information.
To avoid other possible issues generated by a two-way authorization mechanism, Yeh said that customers should be required to go to telecom carriers’ stores in person to activate the micro-payment function.
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