It is a collaborative effort between users and industry stakeholders to create a safer environment for digital transactions.
The digital payments landscape is undergoing a whirlwind of rapid and transformative evolution, fundamentally reshaping the way we engage in financial transactions. According to a recent study by Boston Consulting Group and a leading digital wallet and online payments app, India’s digital payments market is projected to triple from $3 trillion to $10 trillion by 2026. Remarkably, India, which was primarily a cash-based economy, now leads the world in real-time digital payments, accounting for almost 40% of all such transactions. The industry is a hotbed of innovation and collaboration, with financial institutions, technology companies, and fintech startups pushing the boundaries of what is possible.
However, the surge in digital payments has brought about a corresponding increase in fraudulent activities, posing significant challenges to the security of financial transactions and resulting in various forms of cybercrime, such as phishing, malware attacks, OTP fraud, and fake UPI linkages.
Within the expanding e-commerce ecosystem, involving multiple entities at various stages introduces potential vulnerabilities that malicious individuals can target and exploit. In FY22 alone, online payment frauds reported by banks in India amounted to INR 128 crore, according to data shared by the Government, while e-commerce fraud is expected to cost merchants over $48 billion globally in 2023. According to recent RBI data, as many as 55% of digital payments frauds detected in May 2023 were related to UPI transactions, half of which were of less than INR 10,000 in ticket size. Given these alarming statistics, it is evident that robust security measures are urgently needed to safeguard the digital payments landscape.
Government and Regulatory Efforts
Online payment systems thrive on safety, transparency, and convenience, as these factors contribute to building customer trust in the ecosystem. Recognising the importance of responsible innovation in the fintech industry, the Government has taken proactive measures to safeguard the digital payment landscape and ensure hassle-free services for users.
One significant step taken by the RBI is the adoption of card tokenisation. This process involves converting debit or credit card details into unique encrypted tokens. By utilising tokenisation, users can securely save their card details on online platforms without worrying about the safety of their information. Merchants are unable to retain the actual card details, significantly enhancing the security of customers’ cards and reducing the risk of data breaches.
The Government of India has also introduced the Digital Personal Data Protection Bill for public consultation, focusing on processing digital personal data within the country. This bill applies to data collected both online and offline, which is later digitised.
In addition, Indian banks have proposed various measures to combat the increasing trend of online fraud, as reported by recent data from the RBI. These measures include setting a threshold for transactions in new accounts, establishing a central “negative registry” of known fraudsters’ accounts, and implementing a standard operating procedure to halt the flow of funds downstream once fraud is reported. These initiatives aim to prevent online frauds and mitigate their impact on customers and financial institutions.
Industry Innovations and Best Practices
The digital payments industry has witnessed the widespread adoption of various advanced security measures, including biometric authentication methods like fingerprint and facial recognition, as well as on-device one-time passwords (OTP), in-app notifications, behavioural biometric authentication, historical payment-based authentication, and other innovative solutions. These authentication methods and solutions collectively serve to strengthen the security of digital transactions by adding an additional layer of protection. For example, the introduction of dynamic QR code payments has revolutionised the digital payments landscape, surpassing the limitations imposed by static QR codes, by offering a higher level of flexibility and adaptability, allowing for real-time updates and secure transaction processing.
Moreover, artificial intelligence (AI) and machine learning algorithms have played a crucial role in combating fraudulent activities. These sophisticated algorithms analyse vast amounts of data, identifying patterns and anomalies that may indicate fraudulent behaviour. By leveraging AI and machine learning, financial institutions and payment service providers can detect and prevent fraudulent transactions in real-time, mitigating potential losses and safeguarding the interests of both consumers and businesses.
End User Precautions and Practices
Chief Product Officer,
Safexpay
It is a collaborative effort between users and industry stakeholders to create a safer environment for digital transactions. To ensure their safety, users should opt for reputable and trusted payment platforms that prioritise robust security protocols. Regularly monitoring financial statements is crucial for promptly identifying any unauthorised, or suspicious transactions, enabling users to take immediate action. Additionally, users should exercise caution while sharing personal and financial information online, remaining vigilant against phishing attempts and refraining from providing sensitive data to unknown sources.
Way forward
In the era of digitisation, trust has emerged as a crucial factor in enabling consumers to embrace the digitisation movement. In the current ecosystem, innovative payment methods, industry collaborations, technological advancements, and regulatory support have created opportunities for innovation and the adoption of best practices in addressing two key customer priorities: security and convenience. Hence, achieving a balance between transaction security and user experience has become crucial in driving innovation and technology within the digital payments landscape.
