Key concerns about online payments and ways to overcome them

In India, digital transactions were up by 33% to 7,422 crore transactions in FY 22 [till 28 Feb’22 ] with UPI contributing to Rs 452 crore transactions worth Rs 8.27 lakh crore. The country has also witnessed a proportional rise in all other digital payment forms like credit cards, online banking, mobile banking, QR etc.

With growing digital payments, frauds are also on the rise. Around 80,000 frauds worth Rs 200 crore are committed through UPI every month, with 50% of financial frauds committed on UPI alone through various mechanisms like luring customer to making payment to unauthorized QR or gaining confidence to install malware and making the customer use the unauthorized app.

With rising frauds, a lack of robust infrastructure to detect or prevent such instances, and the absence of a redressal mechanism, concerns around online digital payments are valid. Moreover, fraudsters are becoming more sophisticated by the day, using methods like Phishing, Vishing, SIM cloning/swapping for receiving OTP on the fraudsters mobile, malicious QR codes, malicious apps, user impersonation, and more. Ironically, bad actors commit these crimes by leveraging the very technologies that were developed to build better solutions for consumers.

Addressing the challenge through innovation
Fortunately, there is also good news. Payment technologies are constantly emerging to keep us a few steps ahead of fraudsters. For instance, the recent RBI mandate on card storage online through tokenization is a very positive step in right direction of customer data protection and security where it will be nearly impossible to hack and extract card information either from merchant, payments provider or any other ecosystem player handling stored card information. Tokenization not only secures card information but also increases convenience for customers to shop online with single click check out experience.

Global compliance of 3DS2.0 for online card payments introduces added security and convenience by enforcing the entire card ecosystem to capture more contextual information about consumer seamlessly to be used in online risk assessment and fraud management solutions. For e.g. with the new standards for card processing, details around customer location, device, behaviour can easily be captured for real-time decision-making using risk-based authentication. Advancements in fraud screening and security management now allow merchants to deploy sophisticated solutions whilst adding convenience to customers through multiple options like contextual authentication, step up and step down authentication, and challenge/friction vs frictionless authentication in real time. Biometrics are further enhancing fraud management using it subtly in the transaction journey using AI/ML techniques.

Let’s take an example here. A customer ordering grocery using the app to deliver to his registered location from his registered location shouldn’t raise suspicion, should be a straight through transaction without additional authentication level to enhance customer experience. On the contrary, a customer ordering grocery from a very different location to his registered address should raise a suspicion and challenge the customer to further authenticate with additional OTP, biometric etc. based on the risk perception and transaction value. This will ensure that a malicious user in possession of sensitive payment information cannot do much harm and the risk is minimized and proactively mitigated.

Advancements like synthetic ID fraud using facial recognition, deep learning, device geo tagging, device finger printing, transaction velocity checks, combined with real time fraud detection from card, bank networks on billions of transactions can detect fraud in real time.

In spite of all the technological advancements, customer due diligence, basic security principles like not sharing credentials, not responding to malicious emails, calls or panic requests should be avoided to protect themselves.

Security and convenience will always be two sides of a coin which needs a fine balance; too many security controls and customer experience takes a hit, too much customer convenience could lead to lowering security controls. Hence maintaining a fine balance of a risk-based approach is always beneficial for customers, merchants and issuing banks to minimize frauds, chargebacks and disputes arising out of them.

The writer is Vice President – Merchant Acquiring Business, Wibmo – A PayU Company.

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