Digital Payments: In the world of digital payments, there is a million-dollar question that is still not answered: “What is more important, security or speed (performance and ease)?” Financial system security design principles can be organized into logical groups. For example, the least privilege system can be considered a principal and can appear in a group under structure or trust. In the case of “Secure System Evolution,” the principal is in its own group. This is part 2 of my earlier post, “Digital Wallets: Innovation vs. Security.”
Information and Payment Security – Digital Payments
The security of subscriber’s data in terms of KYC information, transaction details, and sensitive information like a bank account, mobile wallet number, and card details is pivotal and the key to any financial system. While making any payment through digital channels, information security and data protection are the most critical components.
On a second note, the kind of payments, amount of payments, velocity detection, etc. under digital payment security might seem like complicated matters. The potential risk here is like the one at a theme park on a broken roller coaster.
Digital wallets, or e-money wallets, are vulnerable to cyber-attacks and hackers who are able to escape with users’ sensitive financial information stored in their digital wallets on the system. To handle such issues, security machines are normally used.
On payment systems, a digital certificate is an electronic file that uniquely identifies individuals and websites on the internet. This file enables a secure, confidential communication channel between the user and the server. It associates the name of an entity that participates in a secured transaction (e.g., an email address or a website address) with the public key that is used to sign communication with that entity in a cryptographic system.
One of the biggest concerns relating to security in e-commerce applications is the use of the correct, reliable, and secure payment method, i.e., the card, Internet banking, mobile payments, or instant payments.
What Is The Perfect Payments Experience?
So the question here is, “What is called a perfectly secured payment system with the best or perfect user experience? The answer is simple: “No such system is perfect or 100% secured”. The systems cannot be secured in one of these activities at least once. Information and cyber security are cultures, not processes; we need to secure our systems every millisecond, just as we breathe every time. As payment technologies progress, the need for securing and protecting them will rise. The methods we use to secure our day-to-day payments need daily improvement.
Given that the mobile payments industry is still a very nascent industry, This industry really doesn’t have clear standards or significant regulatory frameworks. Most of these players are in autoplay, i.e., self-regulation mode. The utmost urgency and importance is to have guidelines produced to assist mobile payment platform developers and mobile payment providers.
Recommendations on security, controls, and privacy are vital and should be implemented to help ensure that consumers, retailers, and the financial institutions that underpin the ecosystem by processing and clearing transactions are all safeguarded from cyber threats.
Traditional banks have refused, albeit unknowingly, to adjust to the ever-changing environment. Clearly, it’s no longer a brick-and-mortar system that the general economy still requires, but critical banking products that cater for the diversity of customer needs—banking on-the-go solutions powered with artificial intelligence, machine learning, and blockchain, to be more specific.
Today Banking is The need, not Banks
It is no longer a four-page form that customers need to complete before they can open and maintain a bank account. A new, vibrant shared technology infrastructure will help.
Digital wallets store the value in digital form and allow an individual to purchase an item online or send funds to friends or family. Depending on the type of digital wallet used, the information stored might include debit, credit, prepaid, or loyalty card data as well as personal information about the cardholder, such as a driver’s license, health card, loyalty card(s), and other ID documents. The use of tokens and cryptograms to authorize mobile payment transactions is now common to provide high-class security.
Going back to the detection (velocity detection) and prevention (security certificates) methods, certificates are issued by a trusted third party, a certificate authority (CA), which verifies the identity of the certificate’s holder. They are tamper-proof and cannot be forged. In reality, velocity detection is defined as checking the historical shopping patterns of an individual and matching that record against their current purchases to detect if the number of orders by the cardholder matches up or if there appears to be an irregularity.
The Secure Element The Secure Element (SE) is a tamper-resistant chip with a secure microcontroller that is designed to securely store confidential and cryptographic data. The SE is a critical component in every mobile payment application, but the way it is used varies greatly depending on the type of mobile payment application and also the type of mobile payment modes used. We will discuss the implementation details in the section that follows.
Security, privacy, convenience, and ease of transaction are more important where cash handling is involved. For electronic transactions, the cost of cash handling can be invested in security. The rapid change in technology, in terms of flexibility and ubiquitous use across the globe, is a necessity. The economy that is up-to-date in technology, both for products and security, gains more confidence in consumers.
Strategies for Improving the Digital Payment System
With trained and dedicated manpower and information security policies and guidelines, we can secure our system. Policies on the use of encryption, secure socket layer (SSL), secure hypertext transfer protocol, payment card industry compliance (if plastic money is involved), safe logins (2-way authentication), and digital signatures should be clearly defined. Digital payment providers should aim to follow security recommendations for the systems they use to provide mobile or digital payment services.
Few modes of Digital Payment
- Banking Cards (Credit, Debit, Stored Value, Prepaid): Used in conjunction with PoS machines, ATMs, and online
- Instant Payments: authenticates the identity of the user, like a debit card, using the phone as a tool instead of a separate card (smartphone and bank account).
- Digital wallets are a type of electronic card that is used for transactions made online through a computer or a smart phone. – The utility of an e-wallet is the same as a credit or debit card: it makes paperless money transactions easier.
- USSD (Unstructured Supplementary Service Data): mobile banking for feature phones
- Banking transaction out of the bank at PoS with the help of a banking correspondent.
Secure electronic transactions enable interoperability between applications across diverse platforms and operating systems. Authenticating cardholders and merchants, ensuring the confidentiality of information and payment data, and defining protocols and electronic security service providers, Digital Wallet Software secures cardholders’ online purchases via a point-and-click interface. With the public key that is used to sign communication with that entity in a cryptographic system.
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 to make a payment handling application more robust and frustrate breakers at the hardware level before reaching the application level
Points to Note:
All credits, if any, remain with the original contributor only. We have covered all the basics of adapting cashless payment models. The importance of such a quality system full of big data is the backbone of any digital economy. In the next upcoming post, we will talk about implementation, usage, and practice experience for markets.
Books + Other readings Referred
- Research through the open internet, news portals, white papers, and imparted knowledge via live conferences and 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, telecom billing and charging, data science, or big data analytics? Leave a question in the comment section or ask via email. I will try my best to answer it.
Conclusion –The main aim of this paper is to determine the factors that can either lead to the success or failure of digital payment innovations. Additionally, it outlines the essential steps that mobile payment providers should adhere to. Over the past five years, banks and fintech may have felt pressured to choose between adhering to regulations or entering into the competition as they delved into new technological advancements that cater to the demands of digitalization and evolving consumer attitudes. The fundamental concepts of BaaS and BaaP involve the utilization of open banking services and APIs that are favourable for developers.
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