Finance: Ensuring a secure environment for a cashless tomorrow

Finance: Ensuring a secure environment for a cashless tomorrow

Hennie Du Plessis, SVP – Financial Institutions, Middle East & Africa, IDEMIA, reflects on some of the major developments and innovations taking place within the digital payments’ world.

The payment experience is ever evolving. From barter, to coins, to banknotes, credit cards and now cryptocurrency, payment transactions have always been part of our world. Until not so long ago, there were three ways consumers used to pay: with cash, by taking notes and coins out from the pocket or wallet, with a card, by swiping or putting the card into a merchant’s terminal, or as a remote transaction, by manually entering card details on a merchant’s website.

The last few years have seen a paradigm shift in the way that we bank, and the way that our service providers deliver the means of payment.

Touchless payment

The pandemic has increased the need for touchless payments that remain secure. Contactless payments have risen during the pandemic, and digital payments have soared – with digital acceptance also increasing to accommodate this consumer behavioural shift. Alongside this trend, chip shortages have created short-term challenges in the issuance of physical payment cards, which has increased the importance of digital alternatives and accelerated the launch of new proximity and remote payment methods combined with digital identity technologies such as biometrics.

Biometrics enhances security and usability of our identities through fingerprint scans, or facial recognition, ensuring that our identities remain our own. While many remain sceptical on the security and fraud ramification of a digital payment ecosystem, a stark 98 per cent of UAE consumers would like to use at least one method of biometrics to make future payments, with 69 per cent interested in paying using fingerprint recognition according to research from Visa.

Biometric enabled cards

Biometric enabled cards allow cardholders to make transactions by simply placing their finger onto a scanner embedded in the card. The fingerprint is then matched against the biometric template stored into the card, and the transaction is authorised the same instant the card is tapped; meaning the contactless payment method can be used no matter the amount of the transaction or the threshold. The result, to ensure privacy, their biometric data is securely stored in the chip and never leaves the card.

Furthermore, with a higher level of security afforded by biometric verification, merchants and issuers will have the option to extend the threshold of contactless payments, which are currently capped at EUR 50 (or AED 220) in the UAE.

Wearable accessories

Wearable accessories are considered to be one of the catalysts to both contactless payment and seamless shopping and customer experience. Considered for a long time as simple fashion accessories, watches, wristbands and rings are now connected gadgets. Whether it is to pay, simplify access to our favourite places, gain loyalty rewards, or use public transportation, wearable gadgets are changing the way we shop.

The potential for wearables in this region is immense with almost 97 per cent of UAE consumers considering emerging payments such as wearables, cryptocurrencies, and QR codes, according to the Mastercard New Payments Index.

Digital First

In parallel, there is an increasing focus on developing not only more innovative payment methods but also seamless digital payment experiences. In an era where customers want everything on-demand, a digital-first banking and payment strategy has the potential to redefine the banking and payment experience.

FinTech and Tech giants are leveraging the payment infrastructure by enabling customers to digitise their cards for proximity, in-app, and P2P payments – to reduce physical interaction and increase digital transactions in a secure manner. Consumers have high expectations when it comes to their integrated user experience (everything now > start paying), and consumers want to control and choose where and how they can access and use their cards (from the issuer mobile app or via third party mobile wallets).

Private label issuers such as retailers and transit operators can utilise digital infrastructure to launch digital solutions, and thus control both sides of the equation (issuance and acceptance), to build disruptive business models both in-store and online.

It is important to note that the term ‘digital-first’ does not mean ‘digital-only’. In fact, different payment forms can, do, and will continue to co-exist, as an extension of the current multi-channel banking and payment experience. The demand for more interesting and premium physical card products is in no small part driven by this coexistence with digital-first services, with physical cards are being issued with brighter and bolder artworks, recycled PVC or luxury metal card bodies.

The rise of eCommerce
While cash on delivery (COD) is still available as a payment option, recent studies have shown that online shoppers in the United Arab Emirates and Saudi Arabia are becoming increasingly comfortable with paying online. This trend has no doubt been exacerbated by the pandemic. In the UAE, for instance, over 60 per cent of shoppers who shopped online paid at least once by a card or digital wallet and have indicated they will consistently choose this method in the future, according to a Research and Markets report.

A 2022 study from Juniper Research has found that globally, the value of eCommerce payment transactions will exceed $7.5 trillion by 2025, from $4.9 trillion in 2021. This will increase the appetite for new payment methods within eCommerce checkouts, including Open Banking facilitated payments, and digital wallet one-click check out buttons.

Next generation payments

In today’s world, the reliance on payment systems is only getting stronger. The strategic positioning of big tech within the payment space is driving counteractive moves to assure domestic sovereignty through a growing number of domestic payment schemes and – in turn – pilots of central bank digital currencies as an alternative to cash.

Cash itself is changing, with individuals increasingly buying, selling and trading crypto assets using exchanges. The protection of these assets is paramount, and we can expect to see growth in hardware crypto wallets to secure assets and ensure offline payment capability.

Security and consumer trust

It is important to remember that with a rise in digital payment comes a rise in fraudulent activities. To maintain a consumer’s trust in emerging payment technology, it is important they are aware of the underlying advanced security technologies that protect digital payments, such as tokenization, biometric authentication, NFC and remote activation, which thus helps build user confidence in cashless options. With this trust, cutting-edge technology can and will ensure the next generation of payments.