Digital Wallets: Innovation vs Security


cash-security-page

This is the part-2 of this post –  Digital Payments – Security vs Speed

Abstract – 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 then world war-2(Just guessing). This effort is welcomed in a need of 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 key to any financial system. Prior to embarking on our journey and asking customers to use any financial system/platform which offer 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 a 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 unable to answer to that question, then you may as well close shop and go home.

Introduction – 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 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 behavior 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.

Main Story – What should be a regulation is a strong hardware-based security layer along with software, which will decrease opportunity for hacking. In case any digital wallet, security checks are key. Global wallet companies like Alipay, WeChat and Apple Pay use hardware-based security layer, which make 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 is key for the next stage of the payments revolution.

war-on-cash

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 is 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 lowest adoption rates. It could be as high as $126 billion, 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 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. 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.

lawn care business cash flow statementConsumer expectations i.e. Faster Payments with the real-time insights as a result of Faster Payments, increasing competition where 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 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 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 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. Case study on creating a mobile-only bank should be reopen and look at from different prospective now. The impact of new technology on central banks: An assessment framework for innovations in retail payments needs to come out in open market to explore unbanked payment methods.

carries_no_cash_two_tone_coffee_mug-raf354f7001b24e00906b05d9722565e2_x7j1m_8byvr_324Conclusion – 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. One of the biggest concerns relating to security in e-commerce applications is the use of correct, reliable and secured payment method i.e use of card, Internet banking, mobile payments or instant payments. Failure to secure the 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.

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5 thoughts on “Digital Wallets: Innovation vs Security

  1. Hi Vinod, valid point is raised here and as everything is getting cashless, security is major concern. few months back in India many accounts were hacked and was huge loss to people and banks. People have been asked to take some preventive measures, but then point is foolproof inbuilt security methods should be there.

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  2. Well said, I foresee a big secure breach in mobile banking especially through the use Mobile APPs by customers. There are fraudulent mobiles APPs out there which customers are prompted to install and after installation the fraudulent APP read customer SMSs on the phone including PINs. The information collected by these APPs is later used by fraudsters to hack into customers accounts……food for thought !

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