While the regulatory body is reworking its policies on reinforcing data protection and cybersecurity, digital fraud’s sophistication is also rising. Improved payment security, thus, becomes a critical strategy for financial institutions as opposed to being just a compliance measure.
Here are a few security trends that will gain popularity among banks and fintech in the years to come:
1. Validating transactions through Multi-factor Authentication
Recognizing the growing need to protect customer data confidentiality, the RBI is pushing for adopting multi-factor authentication (MFA) as a security measure among financial service providers. The RBI has issued guidelines to payment aggregators and gateways, who will now have to get customers to validate their transactions without using their static PIN.
MFA typically has three authentication factors: password, device in use, and biometric identification. With biometric capabilities readily available in smartphones, consumers have been increasingly using this authentication mode in their everyday transactions. Entering a payment password is now replaced by touch or iris-linked authentication. MFA is expected to tighten security around transactions, removing the risk of stolen PINs and, eventually, preventing fraud.
2. Safeguarding customer data through card tokenization
The shift from magnetic strips to chip cards was to prevent the duplication of card information onto another card in a physical store. Much like that, tokenization’s end game is to avoid the duplication of cards digitally. Untraceable payment tokens are generated per card and per merchant. Even if hackers manage to steal tokenized data, they cannot use it, as the payment partner stores the payment information securely.
Tokenization requires less computational power than encryption, meaning that the tokenized information is processed faster and has fewer computer resources. Thus, tokenization is becoming an increasingly mainstream payment security measure, as it is a more cost-effective and secure way to safeguard sensitive customer data.
3. Accelerating e-commerce with 3DS 2.0
With the rise of e-commerce, merchants need to cater to an unprecedented number of online transactions. 3DS 2.0 enables a real-time, secure, information-sharing pipeline between digital merchants, payment networks, and financial institutions. Issuers can use 3DS 2.0 to more accurately authenticate customers without asking for a static password or slowing down their business.
3-DS 2.0 prompts consumers to verify their identity after analyzing the merchant’s contextual data on high-risk transactions, offering additional fraud protection. The older version of this technology, the 3DS 1.0 protocol, was initially written in 1999. Today, nearly 70% of online transactions in India originate from a mobile device. The security feature, meant for a desktop generation, therefore, tends to have an adverse impact on the Payment Success Rates (PSR).
With 10 times more data on payment history, device, channel, location, etc., than the previous version, 3-DS 2.0 helps speed up authentication and enhance security, giving shoppers a faster checkout.
4. Enabling contactless payments with wearable devices
Some banks and digital payment players already leverage technological innovations such as NFC and QR codes to enable contactless payments. Contactless payments made through tap-and-pay, dynamically generated PINs, and wearable devices have made payments quick and easy and added an additional layer of security.
Wearable devices are linked to cardholder bank accounts and use card tokenization features to complete payments. Through mobile banking apps, dynamic PINs can be generated for every transaction.
Contactless payments enable faster checkouts and seamless payment experiences and prevent cyberattacks like keylogging, phishing, and other internet-based frauds. As contactless payments gain popularity, more merchants are upgrading their payment systems to meet this demand.
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