On a recent trip to Tokyo, I was able to see some of the work of my colleagues at the Tokyo NTT Information Platform Sharing Laboratories exploring the potential of two-channel authentication systems. Such systems generally depend on various permutations of secrets shared across both a PC channel and a separate device channel. In essence, the phone serves as a second authentication factor.
Existing two-channel systems rely on either:
1) the client providing a phone number at registration time to which the service provider sends a OTP over SMS when the user logs in. When received by the user on their phone, they then enter it on the PC interface. By verifying the presented OTP, the server can be confident that the user is indeed the owner of the phone and therefore the account holder.
2) the server creating a one time phone number and presenting it to the user through the PC-channel. The user then calls this number from a phone with a previously registered number. The server, by verifying that the call came from a registered number, can be confident that the user is the account holder.
Both systems require that the user's phone number be provided to the server, which presents both privacy and scaleability (the server has to store these numbers) issues. The first relies on the security of SMS.
My colleagues are working on alternatives that:
a) don't rely on a phone number being registered/stored
b) leverage the certificates on many Japanese phones for client-auth SSL
c) authenticate the server as well
In both models above, it is the user that acts as the conduit by which the PC and phone channels are connected (this necessary for them to be correlated and authenticated). In the first, the user takes the OTP from the phone and types it into some HTML form; in the second, the user takes the presented phone number and manually dials it.
The research is exploring the potential for a technology mostly unique to the Japanese market to provide this connection/interface between the two channels. QR codes are two-dimensional bar codes into which can be embedded significantly more information. Critically, over 77% of Japanese phones have support for QR code readers. The phones' cameras can thereby serve as the conduit through which the two channels can be connected and correlated.
The prototype system has the server generate a dynamic QR code and present it to the user when authentication is required. The user uses their phone to take a picture of the code from their PC screen - the phone QR software then extracts the corresponding server address to which a mutual SSL session is established. To authenticate the server, the user sends a short text string from their PC as a nonce that the server signs and presents to the phone.
Below are pictures of 1) a user taking a picture of an on-screen QR code with their phone and 2) the phone display by which the server is authenticated.
The system is attractive because it leverages a (ubiquitous) second factor that users already have and expect to use, requires no specialized client software, does away with the privacy/scaling issue of stored phone numbers, and doesn't rely on the questionable security of SMS.
As Bruce Schneier points out, such systems can't guard against MITM attacks:
An attacker using a man-in-the-middle attack is happy to have the user deal with the SMS portion of the log-in, since he can't do it himself.
Nevertheless, to say that a technology doesn't prevent one attack doesn't mean they provide no value in defending against others.