The combined effect of the 2008 financial crisis and security breaches has decreased consumer trust more than ever before. The payments industry as a whole must work to increase consumer trust in new payments innovations in order for new systems to be adopted by the banks and card issuers alike – only then will consumers have the opportunity to take advantage of new innovations.
It is up to the banks and card issuers to educate the consumer, and this is imperative if we are to see consumer uptake of new innovations that will work to decrease security risks. Ultimately this will reduce losses due to fraud and increase spend due to improving levels of trust and consumer confidence – improving profits/bottom line for the banks.
High fraud levels blighting the industry
Levels of fraud are a key issue for the industry. Banks and issuers in territories like the UK and Australia have embraced innovative new technologies in payments, but the banks haven’t been able to keep up with the additional security to support these technologies. This is the dichotomy that the banks and card issues face: costs incurred to implement new technology versus the cost of potential fraud to the bank or issuer. If the latter is more cost-effective for the bank, we won’t see the innovation take off in the mass consumer market. The losses to fraud are astonishing; according to Financial Fraud Action (FFA), card fraud losses increased by 6% in 2014, or by £28.6 million, to £479 million. Online banking fraud soared 48% to £60.4million in 2014 compared to the previous year.
Mobile security risks
50% of shoppers are fearful of security risks, according to the recent Symantec State of Privacy Report. Consumers are afraid of data breaches, and mobile payments are raising concerns. Most consumers aren’t confident in using mobile as a payments method for all types of transactions, so there are many hurdles to overcome in order to win overall trust.
Just a couple of months ago, Samsung’s mobile payments acquisition ‘LoopPay’ was breached by Chinese hackers Codoso Group. Samsung is using the LoopPay technology to roll out Samsung Pay, yet they claim that the breach did not affect users of Samsung Pay.
Card payment still king with consumers
Payment by card is the preferred method for consumers after cash, and ultimately the card is still the most secure way to pay for goods and services since cards are not networked to the internet. Biometrics is certainly an interesting technology that some pundits are backing as a means to drive adoption of mobile payments, but it is unlikely to take off; it is too invasive and too expensive an investment for the industry.
Overall, mobile is the most insecure payments platform, and we can virtually guarantee there will be a major breach soon. Unfortunately, in order for the banks and card issuers to acknowledge this, there has to be a breach that impacts profits.
Secure AND convenient solutions
The reality is that creating new solutions will be costly to implement but will save the banks and issuers money in the long run, due to the reduced risk of fraud losses. However, payments solutions need to be as much about mitigating security threats as they are about providing a convenient payment option to the consumer.
The banks and card issuers haven’t innovated in this space yet, they rely on innovative start-ups to bring them truly compelling ideas that solve problems for them and their customers. The commercial reality is that solutions proposed cannot be costly to implement for the banks, the solution must be easy to adopt by both parties.
If the banks and card issuers do not address security, significant amounts will be lost and profit margins heavily damaged. Banks and card issuers need to future proof their businesses now against security threats and massive losses due to fraud. Hacking and cybercrime is becoming more and more sophisticated and the banks must stay one step ahead before they fall victim. Secure payment methods are only successful if consumers want to use them and banks can afford to deploy them – any future solutions we create must be viable on all fronts.
[su_box title=”About Simon Hewitt” style=”noise” box_color=”#336588″]Simon Hewitt is a CEO and founder of ScramCard. He has over 30 years experience in Information Security within the Financial Services Industry (FSI). He held senior executive level positions within a number of major international banks and was responsible for multi-million dollar budgets and each organsation’s information security strategy. Simon won a national Australian award for information security awareness development. He’s filed numerous international patents, the majority of which form the basis on which ScramCard’s products and services have been developed. He knows what makes people tick when it comes to payments and information security and because he loves ScramCard and believes the products and services will have a significant and positive impact on the FSI.[/su_box]