Data and Identity Management in a Cashless Society

  • Matthew Williamson, VP of Global Financial Services at Mobiquity

  • 26.10.2020 09:30 am
  • payments

COVID-19: Going cashless for health

With fears that the COVID-19 virus can be spread by handling cash, public health and safety have necessitated the use of card payments. As a result, experts now predict that global non-cash transactions will surpass the $1 trillion mark by 2024.

Even before the pandemic, cash was beginning to die out in the UK – in 2019, cash made up less than a quarter (23%) of transactions in the UK.

COVID-19 has accelerated the existing trend towards a cashless future. Not only can going cashless reduce the transmission of the virus, but it can also facilitate a faster and more convenient payment experience for businesses and customers alike. Instead of rummaging through your wallet, payments become seamless with a touchless tap of a card.

With the increasing consumer demand for digital payments, it’s essential that banks mitigate the privacy and security risks. 

Staying on top of cybercrime 

According to the Access to Cash Review 2019, 60% of respondents believe that we would all have less privacy in a cashless society. Many people want the privacy or anonymity of cash, even when their activities are lawful. While digital payments enable banks and financial institutions to better understand their customers, this opens up the risk of customer data being exploited by fraudsters.

In 2019, £13 billion was lost to digital identity fraud globally, and as more people turn to digital payments during the pandemic, online payment fraud is on the rise by at least 73% this year.

In particular, card-not-present fraud – where someone else’s card is used to make a payment without the card being physically present – is on the increase. This is especially common in the workplace; employees making orders for necessities, like office supplies, are 81% more likely to fall victim to this type of fraud than point-of-sale fraud. 

Consequently, card-not-present fraud caused over £470 million in losses last year. The consequences of this type of fraud are immense. Not only is the process for recovering funds long and expensive, but it also creates a knock-on effect where third-party suppliers, customers and merchants lose out.

Keeping customer data safe

Through my work as a fraud investigator at a major travel group, I understand how to prevent fraud and bolster the security of payments. During my current role at Mobiquity, we worked with a banking technology provider to mitigate fraudulent transactions within the payee validation process. This helped reduce invoice fraud by 81% for a leading European bank.

As more people turn to digital banking services for the first time, customers should be guided on the security best practices to ensure that their personal data isn’t compromised. Companies and financial institutions with access to sensitive data have a responsibility to maintain adequate risk management systems and ensure that customer payments are safe and secure.

Open Banking offers a golden opportunity to improve the security of digital payments. For instance, Strong Customer Authentication (SCA) can bolster the security of mobile banking applications as it requires all electronic payments to be performed with multi-factor authentication. This adds a significant layer of security and prevents several types of fraud, including card-not-present.

Biometrics can also be used to validate your identity and ensure that your money is just for you. While countries across the globe have developed biometrics identification, such as recording your smile or iris to make payments, there has been resistance to similar services in the UK due to consumer concerns over privacy. 

However, with innovative smartphone features like Face ID, the tides seem to be turning. Mastercard is developing a Biometric Card to offer another layer of security for in-store purchases, by combining chip technology with fingerprint verification instead of a PIN. With the fingerprints being stored only on the card itself, rather than on a database, there is no longer a trade-off between going cashless and data security.

Ultimately, one of the most significant barriers to going cashless is the lack of trust in the security of new payments systems and consumer confidence. In a digital world, cybersecurity is of the utmost importance.

Companies and financial institutions also need to be transparent with their customers: Where is your data going and how will it be sold? With millennials desiring non-traceable payments, data privacy and security needs to be reassessed to match consumer needs and preferences.

Identity management in a cashless society

Identity management is central to protecting vulnerable people as we move to a cashless society. With 2.2 million adults in the UK still using cash as a single form of payment, and 1.3 million unbanked, we need to ensure that all segments of society are included in our cashless future.

In particular, going cashless raises concerns about social and financial exclusion: 36% of people believe that social exclusion is the most negative impact of a cashless society.

For instance, with less spare change in our pockets, going digital threatens the lives of homeless people. To solve this, Greater Change – an Oxford-based non-profit – helps homeless people to crowdfund using QR technology. Passers-by can scan the person’s QR code with their phone and make an online payment to them. A similar initiative was created by TAP London, a non-profit, and GoodBox, a UK technology start-up, to set up 90 contactless giving points around London for people to donate to the homeless. The donations were then pooled and split between 22 homeless charities.

So, not only should we ensure that people are not left behind in a cashless society, but we also need to support at-risk groups to keep people safe. 72% of people in the UK believe that in a cashless society, vulnerable groups of people would be more likely to get scammed or defrauded. This is where technology can come in: AI can monitor unusual spending patterns to alert banks to suspected fraudulent transactions, giving vulnerable people and carers more confidence in digital solutions.

However, innovations alone aren’t enough. We need a global engagement programme that takes a sector agnostic, human centric approach combined with the latest technology, to help those who are most at risk. Customers need to be educated on the safe use of digital payments to protect their data and identity from cybercriminals. In particular, older people and vulnerable groups need a helping hand to become familiar with digital banking solutions and boost their confidence in using them.

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