Evolving Payment Solutions

For many centuries, Currencies which had taken over the barter system long ago remained the favorite or only option for payments for the goods and services. It is only in the twenty first century when mankind came up with the new ways of payments. From swiping a credit or debit card on a device to clicking on a computer screen to tapping on smartphone, now you have a lot many options for payments. Thanks to all the other options, you don’t have the burden of carrying cash or currency notes when you go shopping these days. On top of that if you have a payment application on your smartphone, you don’t even have to swipe any cards.

Impact on Ease of Doing Business

The ease of doing business with the evolving payment solutions must not be justified without comparing it with the uneasiness during the currency-only phase. Earlier when you didn’t have the exact required amount for an individual payment, you needed to pay extra and ask for the remaining change or ask to keep the change. This entire process was not only inconvenient, but it was also tedious and time-consuming. With the new payment solutions, at least this issue has been resolved.

When a business received cash from its customers, it had to go to banks to deposit the amount daily or on a regular basis. Digital payment solutions help businesses skip this step by directly depositing the amount from the customers’ banks to that of the businesses. In a broader sense, new payment options brought transparency in payments, leaving less or no scope for corruption or discrepancy.

Security Implications

Just like any other change, evolving payment solutions have also come with their own demands, needs, drawbacks, or concerns. Security implications and regulatory concerns are the two major factors that cannot be ignored at this premature stage.

The following examples can be cited as prominent data security threats out of many in the recent times.

• A malware had infected the network of Hitachi ATMs two years back. The hackers could access login credentials and engage in covert transactions whereas the company could do nothing more than asking its users to stop using ATMs before issuing fresh cards.
•  Recently, a group of hackers gained the private information of over six million users after breaching the security of British Mobile Company. The stolen data was used for purchasing mobile accessories and the unsuspecting users had to bear the expenses for those purchases.

The privacy risks posed by the digital payments harm consumers, businesses, and markets alike. By paying online, consumers expose their account details to a platform, making the account vulnerable enough for fraudulent practices. However, with tight data security from both the ends of the consumers and the businesses or applications, any threat can definitely be avoided.

Some payments systems may suffer from vulnerabilities if they were not prospectively designed based on the Privacy by Design principles. The centralized storage of data may be risky at the back-end whereas at the front-end, it will enable data misuse in case there are faulty capture devices. Payment systems must be designed to protect privacy; they should carry unbreachable encryption and open standards to avoid the possibility of data being transmitted.

Kiki Del Valle, Mastercard’s senior vice-president of commerce for every device, says “We are providing the consumers with the tools they need in the Internet of Things era.”  To ensure security of payments, Mastercard has unveiled a few Application Programming Interfaces (APIs) for card issuers, which is expected to provide consumers with a single view of the location of their cards across all digital devices. Consumers can easily control how, when, and where their cards are used when accessing their card issuer’s mobile banking app. They can also remotely deactivate cards or set spending controls at the device level.

Regulatory Concerns

The regulatory concerns on the global digital payments are alarming as a standardized system of rules and regulations to handle, record, and secure global payments is yet to become a reality. Hence, the current practices seem to be moving like an unruly bull with every country having their own way of dealing with the issues.

Regulations for the evolving payment systems originate with a country's financial and government institutions. The banks, credit and debit card issuers also bring in self-regulation by establishing their own stringent rules for transaction security and safety. Many countries including North America and even parts of Europe have made a certificate from an authority mandatory for securing every credit and debit card transactions. However, many other countries such as China, Pakistan, and India are yet to create a regulatory framework to ensure secure online payments. The lack of a sophisticated online shopping or transaction system in these countries can be blamed for the lack of a regulatory framework.

A smart card, also known as an EMV, has been touted to be a solution to bring a higher standard to all global payments. These EMV cards use electronic cash instead of currency and contain embedded 8-bit microprocessors. It cannot be denied that these types of cards pave the path for a standardization capability for a globally regulated payments system. As a different approach, some global payment providers are rather comfortable with digital wallets while others have their faith bestowed on cryptocurrency as a solution to create a unified global payments system.