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Comment by pgeorgi | Hacker News Reader

The two use cases (2FA via SMS and M-Pesa) have different threat models and use different parts of the technology stack.

2FA via SMS requires a private channel, but SMS wasn't built to be end-to-end encrypted (although it could be, using the SIM's processor, such a proposal will be shot down by the state actor members of the relevant standards body. See the less-than-perfect security profile of 5G), and so whenever a message is diverted within the system, somebody else can take over.

M-Pesa requires message to be trustworthy, and the SIM app can sign them with a key that resides only on the chip. The transactions are probably not very private (so it might be possible for an eavesdropper to figure out that user A sent X currency units to user B) but that's not a make-or-break requirement for the system to do its job (unlike for 2FA via SMS).

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Does M-Pesa do any message signing in the sim processor over what would happen for a regular SMS? I don't think it does...

M-Pesa simply has quite high fees to cover fraud losses.

What if you lose your phone? Is there some sort of recovery mechanism to get your money?

If so, wouldn't it be possible for criminals to social engineer this recovery process, similar to how they use social engineering to steal numbers in the US?

If you loose your phone then you must walk in to the nearest office of your mobile phone network provider. And there are many across the country (Ghana). No one can do it on your behalf, and you can't do it over the phone or online. You have to physically go to their office with with a valid ID to recover your SIM card.

Even if you don't get to recover your SIM card early enough, anyone with access to your phone must know your wallet PIN code to be able to make transactions

If you loose your phone here in Tanzania, the phone company will require a police report and a copy of a photo ID(passport, drivers licence or national ID card) that matches the lost line and some will additionally ask you to remember the last few calls that was made by the lost line. All the above will have to be done person in one of many branches operated by the phone company.

I'm fairly certain mpesa and all other mobile money platforms just runs on top of plain ol USSD, which similar to SMS isn't encrypted as far as I know.

It's "secure" because the system requires a pin to authenticate the USSD session. So a SIM swop won't provide an attacker access to the victims account.

I suppose there's a possibility for doing a MITM attack but you'd have to do it between the tower and phone (GSM I think) or between the telco servers (SMPP or SS7), none of which I think are trivial or even possible in some cases

I dug through the literature again, and there are several systems: some using USSD exclusively, others using SIM applications that apparently employ both USSD and SMS for communication.

In all case there's some amount of authentication going on, and they all allow retrofitting additional lines of defenses if necessary.

2FA SMS is helpless as long as it's layered on top of plain old SMS (which for political reasons won't become secure).

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