Breakthrough of the Century-Online Payments
A device with a stable internet connection, a bank account to link with and some knowledge of how the process works.
It cannot get simpler than this.
Online Payments is one among the most innovative discoveries of the century.
In a world where people do not have time to look after themselves, online payments came in as a welcome change. There once existed a time when long queues and crowded markets were the only options for people. With the advent of online payments however, people have the comfort of making payments from their homes. So shorter queues and less crowded markets- how times have changed!
It is very rare to find shops which do not have the option of making payments through Google Pay or Paytm- showing its reliability.
So when did online payments start? Let's go back in time
HISTORY
Online payments began in the 1990s. The Stanford Federal Credit Union was the first institution to offer online banking services to customers in 1994. However, early online payment systems were not very user friendly, requiring specialized knowledge of data transfer protocol.
Early players in digital payment were Millicent and Ecash, which offered services that used micropayment systems and electronic alternatives to cash, such as e-money, tokens or digital cash.
The founding of e-commerce pioneer Amazon in 1994 provided further impetus to these early digital payment efforts.
However, it was the emergence of PayPal which boosted the popularity of online payments. Its popularity took off when it became popular with eBay users.
PayPal consistently innovated, with features like payments that could be made using email addresses, the addition of new currencies, mobile payment apps, HTML payment buttons, and using a reverse Turing test (to determine if an interaction was human or machine) to reduce fraud.
India- Beginnings and Growth
Contrary to popular belief, e-commerce began in India in the mid 1990s. But it was only in the late 1990s that the option of making online payments were made available, with Cash On Delivery (COD) being the only option till then.
However, COD remained the preferred payment option for many years ahead. The main reason for this was the two-factor authentication, more popularly known as 2FA. For the uninitiated, 2FA is an extra layer of security used to make sure that people trying to gain access to an online account are who they say they are. First, a user will enter their username and a password. Then, instead of immediately gaining access, they will be required to provide another piece of information. This second factor could come from one of the following categories:
- Something you know: This could be a personal identification number (PIN), a password, answers to “secret questions” or a specific keystroke pattern
- Something you have: Typically, a user would have something in their possession, like a credit card, a smartphone, or a small hardware token
- Something you are: This category is a little more advanced, and might include biometric pattern of a fingerprint, an iris scan, or a voice print.
A compromise on any one of these steps will keep the account locked. The advantage of this is that it keeps the account secure from any fraud transactions. However this additional security has its own drawbacks.
- Loss of Factors
There is no certainty that authentication factors will be available when one needs them. Typically, one can be locked out of his/her account after one mistake is made.
In situations when power is lost or phone is damaged by water, one won’t be able to get SMS codes as the second authentication factor. Relying on a USB key as a second factor is also risky. It can easily be misplaced or accidentally run through the laundry.
2. False Security
If one gets locked out of his/her account, there is a need to reset the account, which puts the user in the same situation as that of a hacker who tries to get access into the account.
3. It an be turned against users
While two-factor authentication is intended to keep hackers out of an account, the opposite can happen. Hackers can set up or reconfigure two-factor authentication to keep the user out of their own accounts. Looks funny but can happen:)
Cut to the present.
The Government of India demonetized high-value currency notes in November 2016. On the back of the “Note Ban”, the government began pushing cashless payments. This drive resulted in the proliferation of several digital payments such as UPI, BHIM, BharatQR and, most recently, Aadhaar Pay.
At present, India has a credit card, debit card, e-wallet, m-wallet, realtime A2A and biometric. Today, there are close to 330 million online shoppers in India. Thus recent times have shown that India is slowly going into the completely digital mode, as was envisioned by the government.
The latest revolution in the online payment world is contactless cards. A contactless card is a chip card that also has technology embedded in it that lets one pay over a secure radio interface, much like Apple Pay, Android Pay or other mobile wallets. The main advantage of this card over the chip cards is that when one taps his/her contactless chip card, a cryptographic code that’s unique to the card and to the transaction is created, thus ensuring secure payments.
Contactless cards allow payment up to 2000 INR without a pin and above 2000, with the pin. The most popular one is the Kochi 1 RUPAY card, which we all have. RUPAY is a national domestic payment scheme in India, run by NCPI.
Challenges and Measures
Online Payments have their own share of challenges and it is extremely important to overcome them if the goal of cashless payment has to be completely achieved.
- Fraud and chargebacks
Though measures are being taken by all online platforms, it is still common to see people reporting cases of excess money being charged or multiple transactions being done.
With a large amount of card information stored and transferred online, it has been become easier for hackers to get access to this information.
Every time new measures are taken to prevent fraud, hackers step up their game and find new ways to avoid the newly set barriers.
There are two main reasons that online fraud occurs as often as it does:
- It is fairly easy for hackers to steal the needed data. For fraudsters, it is easy to buy this information on the black market.
- Lack of prosecution for this type of crime.
The lack of prosecution in fraud is due to the following three reasons:
- It is hard to detect online fraud and catch the correct fraudster. The fraudster frequently creates a fake email account and opens a post box under an alias revealing no information about himself.
- The police do not prioritize online fraud nearly as highly due to the fact that the average amount of each case is low.
- Online fraud repeatedly crosses borders, which makes it harder to find a legal punishment.
The government must thus, take measures against such fraud transactions.
2. Technical Integration
Online payment systems run the proprietary gamut across hardware and software platforms. Credit card-affiliated payment processors, while more secure, can be expensive for online retailers. Added to the expense is the lack of interface between processing systems — it may be difficult or impossible for a PSP to link with other systems, resulting in processing and payment delays, lost transactions, and expensive fees.
In true real-time processing, a combination of features, including integrated systems and gateways, addresses liquidity issues and minimizes delays, while preserving online transaction integrity. A payment processor that provides for immediate and individually processed transactions can open client accounts in more than one acquiring bank, thus avoiding the delays often inherent in automated clearinghouse processes.
For online merchants and consumers alike, the bottom line is an easy, seamless and secure transaction process, most often provided by a PCC DSS Level 1 payment processor.
3. Cross-border transactions
Cross-border payments can be slow, inefficient, and expensive, but they play an important role in global trade. Typically, national banking infrastructures can’t handle cross-border payments, resulting in independent and non-uniform development in technologies and software platforms that complicate or stall cross-border transactions. New developments are beginning to shape cross-border payment requirements:
- Emerging transnational systems will decrease reliance on correspondent networks
- Government-led initiatives and mandates will begin to regulate payments and fees
- Payment systems will manage credit risk, liquidity, and costs more effectively
- Multinationals will achieve economies of scale, with a side benefit of consolidating credit risk
- Outsourcing will increase processing efficiency and drive down costs
4. Digital Security
Digital security is the protection of online identity. Criminals are finding new ways to operate and steal information from digital users for their own personal gain. Digital security is an all-encompassing term which includes the tools one can use to secure their identity, assets and technology in the online and mobile world.
It plays an important role in the world of online payments, so that payments are made securely without any threat of cyber - attacks. Some steps which can be taken to make digital payments more secure are:
->Updating to the latest software
Yes, it may be annoying to be constantly bombarded with intrusive software updates on the mobile device or any other hardware that supports digital payments. But the truth is that these updates are done by their respective parent organisations for good reasons. A majority of minor and frequent updates you spot will involve bug fixes and UI improvements, all for the sake of making crucial elements like the transaction of money smoother and less error-prone. Set the device to accept software updates automatically and always go through what the update is all about to understand how to make the most use of it.
->Activate basic security measures
Privacy is an essential part of day to day living, especially if one is living in a world where everything one does can be tracked by a simple few button presses. When it comes to securing critical data, smartphones are the go-to device in the digital age. Basic security measures like passwords, pins and biometric authentication are used extensively, and this is further aided with budget-friendly smart devices also including similar security measures. The practice of securing personal digitized data must be spread nationwide if the country is truly going to transform into a digitally sovereign currency.
->Make the most of two-factor authentication
Though two-factor authentication comes across as a disadvantage in online payments, some payments do require it for the purpose of digital security. It greatly reduces the risk of fraudulent activity during digital payments. E-wallet service providers will prompt one with a One-Time-Password that has to be entered to confirm payments after one goes through the initial security measure of entering the personal password. This security measure is practised across all major payment service providers, so make sure to have all the mandatory requirements sorted out before going ahead for purchase via digital means.
->Swipe only at trusted POS systems
Card payments in India are at a high risk of fraud due to the ease in which PIN number and card details can be duplicated. Fortunately, advancement in payment techniques like mobile e-cards is removing the risk of carrying too many cards in the purse. One must also be wary of where to swipe their card; it is best to swipe at trusted shopping centres that use on the best and latest POS machines, provided by leading payment solution providers like Bijlipay.
The last, but the most important challenge is awareness.
Not everyone in India is completely aware of online payment methods. This becomes a reason for frauds to misuse their data and make unlawful transactions. Awareness is the main obstacle to the Digital India dream.
Even with these challenges, there is no arguing the fact that online payment is the most secure means of payment. Hopefully, we will see all the challenges being resolved in the near future and achieve the goal of making the country a cashless country!
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