Digital Wallets: Innovation vs Security

Digital Wallets – Digital Payments will be 3-4 trillion euros USD market by 2020 as World is running to get their bite of share from Payment cake including Apple, Microsoft, Facebook and many many other BIG players. So manufactures needs to ensure very high security for users to gain their trust and secure their transactions with secure element chips, the architecture of the secure element should be designed to be hardened against attacks on the phone. Digital Wallets – This is the part-2 of this post –  Digital Payments – Security vs Speed

 

Drive Against Cash

Drive against Cash or is it a case against Cash. In full swing across the globe and specifically India which is on a trajectory perhaps bigger than world war-2(Just guessing). This effort is welcomed in a need of the hour but definitely not at the speed. Security of subscriber’s data in terms of KYC information, transactions details and sensitive information like bank, mobile wallet, card details are pivotal and the key to any financial system.

Prior to embarking on our journey and asking customers to use any financial system/platform which offers users interfaces such as Mobile App, Online interface or Mobile phone interface; a serious need exists to understand what security has been built on, and which tools, systems, software and techniques are used to ensure protection.

Prior to using a cashless payment instrument, the user requires a basic level of understanding and trust of the system. When it comes to running an online business, the most important question is “How will my customer pay me?” If you are unable to answer that question, then you may as well close shop and go home.

 

Digital Wallets and Security

If you are excited & passionate about using your digital wallet with any of wallet services providers in India or elsewhere across the globe then this is important, digital wallet or eMoney wallet is vulnerable to cyber-attacks and hackers who are able to escape with your sensitive financial information stored in your digital wallet.

As payment technologies progress, so will the need for secure and safe methods for our day to day payments. Due to the pressure of accepting this new manner of banking, banks may feel they need to decide between complying or competing or refusing and loosing out as a result, as FinTech explores new technologies that meet the challenges of digitalisation and changing consumer behaviour every day.

Personally, I am paranoid about security and will never use any method which is not secured. A strong Payment Gateway will provide the merchant with a wide array of payment options so that no transaction is lost because the customer does not hold a suitable payment option.

 

AI-based Hardware for Digital Wallet Systems

What if regulation comes out to enforce strong artificial intelligence based hardware security layer along with software. This will decrease the opportunity for hacking. Adding machine learning algorithms to detect velocity and pattern would ensure it gets safer.

In case of any digital wallet, security checks are key. Global wallet companies like Alipay, WeChat and Apple Pay use hardware-based security layer, which makes them more secure for online transactions. “You will be surprised because most of the banking or wallet apps around the world don’t use hardware security difficult to digest or understand why.

They actually run completely in open software mode and users password can be stolen with ease; having said that I don’t mean to claim if hardware-level security is not built in, so the wallet is not secured or should not be used, all matter is what level of transaction volumes, numbers and values we process also matters to ensure cost effectiveness comes into play. For this to happen effectively, planning and preparation are key for the next stage of the payments revolution.

 

Information and Data Storage

A key issue for consumers engaging in mobile commerce and payment transactions is information disclosure. The technological constraints of mobile devices, including small screen sizes and limited memory or storage capacity, can limit the amount of information that consumers have access to during a transaction; a small screen, for example, limits the amount of text that can be displayed to a consumer. Today, smartphones are the driving force behind a lot of innovation and changing consumer habits.

For example, they are playing an increasingly important role in contactless payments, which are booming around the world. In the UK, the amount spent by shoppers using contactless payments soared by 166% in 2016, with half of British’s now using contactless payments at least once a month.

A memorable African proverb “If you want to go fast, go alone but if you want to go far go together” keeps coming back in my mind. Financial institutions need to be innovative and keep up with the speed of digitalisation, whilst continuing to be stable and resilient.

At the same time if we think that there are too much technology and less expectation then wait for the virtual reality, by 2020, according to the study conducted by the Analysis Group and commissioned by Facebook, $14.6 billion in revenue is due to come from Virtual Reality based technology.

That’s based on the lowest adoption rates. It could be as high as $126 billion, a consideration that whole revenue will not touch FinTech or banks will amateur. Technology has evolved, will change further and will keep the same trend, which means it won’t stop. In my youth, if a child was found to be poking his nose, creating snide remarks if he had found a treasure.

Similarly, American insurance companies are coming up with insurance technology or Insurtech based on this childhood joke basing business cases on the same concept, offering dental insurance and mouth insurance based on data taken from toothbrush tracking. Security & privacy is gone if security does not match the speed and pace.

 

Good Technology – Bad Privacy

In the start of the post, I mentioned technology is good and will happen without a doubt but other critical factors should also come along not only technology.

Consumer expectations i.e. Faster Payments with the real-time insights as a result of Faster Payments, an increasing competition where the partnership is a huge step in helping them to ease it out & better manage it and generating new revenue streams is at heart of technology. It is incredible to note and see how quickly new technologies change consumer habits and expectation which in turns help to improve quality of life.

When the ATMs were starting and pointed out the 24X7 era of service to access cash any time but what it really changed was consumer expectation around service availability, not just cash.

As payment technologies are evolving too fast, so too will the way we pay should also be. Now consumers expect everything instant it means being able to send money to friends or set up regular payments knowing it will be an instantaneous and simple process. Payment is basically a networking solution of choice for consumers, across the networks, which convert their tangible item into a conceptual item.

Consumer payments have empowered the telcos, cloud solution providers and FinTech for each use-case of payments. Consumer payments other then cash needs to be provided by far the best feature set and the highest performance systems.

As a condition of security policy regulatory framework to support fiscal responsibility, providers compliance departments must ensure that sufficient funds are maintained and set aside for initial and ongoing data security compliance responsibilities to protect consumers and other confidential information stored, processed or transmitted to support fiscal transactions, including the collection of payments.

Making the customer central in the digital banking journey and humanising the digital experience protection of consumers confidential information, which is stored, processed and transmitted to fiscal transactions, including the collection of payments should appear super easy.

The case study on creating a mobile-only bank should be reopened and look at from different perspective now. The impact of new technology on central banks: An assessment framework for innovations in retail payments needs to come out in the open market to explore unbanked payment methods.

One of the biggest concerns relating to security in e-commerce applications is the use of correct, reliable and secure payment method i.e use of the card, Internet banking, mobile payments or instant payments. Failure to secure sensitive information can cause major damage to the service provider’s organization in terms of financial fraud, identity theft, legal regulations, loss of consumer confidence, etc. Security controls that can be employed in making a payment handling application more robust and frustrate the breakers at the hardware level before reaching the application level.

 

Points to Note:

All credits if any remains on the original contributor only. We have covered all basics around mobile payments security and the importance of mobile payments data. In the next upcoming post will talk about implementation, usage and practice experience for markets.

 

Books + Other readings Referred

• Research through open internet, news portals, white papers, notes made at knowledge sharing sessions and from live conferences & lectures.
• Lab and hands-on experience of  @AILabPage (Self-taught learners group) members.

 

Feedback & Further Question

Do you have any questions about AI, Machine Learning, Data billing/charging, Data Science or Big Data Analytics? Leave a question in a comment section or ask via email. Will try best to answer it.

 

Conclusion – What makes a digital payment innovation fly or die. Given the change of pace over the last five years, banks and now fintech’s may feel they need to decide between complying or competing, as they explore new technologies that meet the challenges of digitalisation and changing consumer behaviour. Open banking services and developer-friendly APIs which are basic or underlying principals of BaaS and BaaP.

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