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GUEST COMMENT Cybersecurity efforts need to be urgently revised as digital payments gain popularity – Guest Comment | #creditcard | #cybersecurity | #informationsecurity


The Covid-19 pandemic has made us extremely vulnerable. Throughout this crisis, more than ever, we have come to rely on computer systems, mobile devices, and the Internet to connect, shop, work, and exchange information.

 

Owing to the pandemic, retailers rapidly added new shoppers’ fulfillment possibilities, revamped their ecommerce sites, and moved their technology investments in light of changing consumer behaviours.

 

As a result, many digital and e-payment platforms have never been stronger. The Covid-19 crisis may have put the world economy on the sidelines, but in recent months online payment transactions have jumped by almost a third.

 

Average spending has tanked, but we still need money for our basic essentials. This need is greater than ever in these hard economic times, contributing to an rise in the demand for money transfers as well as digital payment platforms.

The Covid-19 winners

During this time, it has become significantly less tempting to visit brick and mortar banks but for most fintech firms, the future looks really bright. WorldRemit, for example, recently announced that the pandemic has stepped up the company’s rapid growth they have experienced since the start of this year. Remitly also announced a 40% increase in its transaction volumes during February and March.

 

Another beneficiary of the current crisis is the cashless payment market. The appeal of contactless cards and mobile wallets indicate that customers are worried about the health hazards associated with handling coins and banknotes.

 

According to an Electronic Transactions Association survey, 27% of small businesses are making use of contactless payment systems, such as Apple Pay, to weather the economic crisis. Only the US Treasury Department allows unbanked citizens to receive emergency checks through mobile payment systems.

 

Retailers are also promoting the cashless movement. For example, the Burger King now allows customers to use their order-friendly application to pay for their drive-through orders prior to collecting.

 

There is no doubt that Covid-19 will speed up the current digital payments trend in Asia, and particularly in China. While most retailers in the US are still trying to wrap their heads around headless-commerce, Chinese President Xi Jinping embraced blockchain at the end of October 2019, calling it a major breakthrough for independent modernization of core technologies.

 

He added that the People’s Bank of China will be replacing cash with a digital currency provided by the government. The Chinese government vigorously promotes their internet banking system, while western countries seldom use a top-down governance strategy.

 

Western countries, for example, have moved at a slower pace towards digital payments than China. According to Deutsche Bank, part of the reason lies in the various countries’ different payment cultures. A third of people in OECD countries see cash as their favorite payment method, and over half agree that cash will always be available. Cash remains a strong preference in many European countries (in particular Germany) and the US.

The hidden risks in fintech technologies

However, the positive growth experienced in the ecommerce, fintech, digital and e-payment sector also comes with some hidden threats.

 

Every online shopper and ecommerce retailer should be aware that the incorporation of fintech technology in traditional banking systems, for example, poses a serious concern when it comes to data protection.

 

Moreover, the rapid development of digital payment platforms has made customers especially vulnerable to breaches within IT networks.

Security risks related to third-parties

Internal security does not always suffice, particularly when it comes to banks. Much of the time, therefore, when banks or other financial institutions utilise a fintech product from a less-than-trustworthy service provider, they eventually lose data, experience service failures, and may even suffer reputational loss.

 

Fintech services, banks and other financial institutions should consider any fintech-related risks in their risk management assessment to eliminate third-party risks.

Hacking and malware attacks

Malware attacks and hacking are the world’s most prominent security concerns. Hackers are currently targeting the Worldwide Interbank Financial Telecommunications Society (SWIFT). Nearly all banks and leading financial institutions exchange vital finance information using SWIFT systems.

 

However, the recent cyber attack on the SWIFT infrastructure showed the level of sophistication that hackers and malware attackers employ. Banks and financial institutions have process vulnerabilities and hackers use these vulnerabilities to launch malicious attacks.

Data breaches

We all know that data, irrespective of domain, plays an important role in all industries. And data is, of course, extremely essential for banks and other financial institutions. Nevertheless, the advent of unstable financial sector fintech applications has greatly increased data infringement problems.

 

Credit card data and related user information are readily accessible to hackers who are predisposed to making fraudulent online transactions. The financial institution collaborates with third parties, contributing to data loss due to inadequate fintech services.

The inherent money-laundering risks

Fintech-led banks often use cryptocurrencies in their financial transactions. Such cryptocurrencies are an essential component of the Fintech environment, and are not strictly governed by any set of global regulations or standards.

 

The widespread use of non-regulated currencies could therefore contribute to illegal money laundering and even terrorist financing. Since the identification of the receiver is not possible in fintech-enabled transactions due to the pseudonymous nature of these technologies, money laundering operations receive adequate support from fintech services.

Digital fraud and identity risks

The use of mobile apps with unique passwords and security codes has been significantly increased by the implementation of digital technologies in banking and finance. These authentication codes and passwords can be accessed by a hacker quite easily as they are not as secure as most people believe.

 

Because of possible weak fintech infrastructure provided by some service providers, important and sensitive data can easily be accessed. Financial institutions should also review their information security architecture before implementing fintech to counter these potential risks.

 

Security risks inherent to the cloud

One of the main facets of the fintech industry is cloud-based applications. Cloud storage platforms deliver everything in the Fintech world, from payment gateways and electronic wallets to secure electronic payments. It is essential for banks and financial institutions to maintain the confidentiality and security of their financial data.

 

While cloud-based services are viewed as a secure way to store data, the absence of suitable security measures may compromise your confidential financial information. In certain situations, the organization partners with an ineffective, cloud-based service provider and then suffers major data losses.

Conclusion

To conclude, if hackers are effective in their attempts to access digital or e-payment platforms easily, consumer confidence would be dramatically reduced when it comes to continued online payments.

 

All this will lead to slower growth in both fintech and ecommerce industries. Balanced innovation is therefore important to encourage the development of the fintech industry and to reduce the overlooked risks of digital payment services.

Sam Bocetta is a former defense analyst, now a freelance journalist

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