How Tech Innovation is Strengthening Security in Digital Payments

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Recently, RBI announced its first global hackathon on digital payments titled HaRBInger 2021- Innovation for Transformation, themed upon ‘Smarter Digital Payments’. The thought that the highest financial regulatory body in our country, the RBI is announcing such measures is noteworthy. This reflects the priority accorded to tech in enhancing security in digital payments. 

The objective of the hackathon is to help build robust solutions towards a more secure digital payments ecosystem and ensure consumer data protection. This is a welcome step that stands to reinforce the critical role that tech-enabled innovations play in amplifying data security in the digital payments landscape.

 

Digital payments scale newer heights

Digital payments are emerging as a booming sector in India. Statistics reveal that digital payments transactions have soared by 76% in the last 12 months, adding several first-time users. 

Buy Now Pay Later, a high-growth segment within the digital payments cohort, clocked a steep 569% growth, clearly indicating the preference for credit-enabled purchases and efficient options that offer interest-free credit periods.

Let’s consider another example. E-NACH, which facilitates automation of regular payments, saw transactions spiral from 500 at the beginning of 2020 to clock a 23962% growth by March 2021. A study indicates that the digital payments industry is all set to register a 27% CAGR and cross revenues of INR 7,092 trillion by FY25. The key drivers would be:

• Diversification of use cases across customer segments and merchant categories through tech innovation
• Reform thrust by the Government especially towards security measures and data protection regulations
• Tapping into the digital-first customer preferences especially by millennials, high mobile ownership and easy Internet access

The rapid growth metrics emphasises the importance of further fortifying the security measures in digital payments via tech to ensure wider acceptance and prevention of fraud. 

 

Exploring viable alternatives that augment security in digital payments

To truly become a ‘cash-less’ digital-only economy, it is vital to support the growing consumer sentiment towards digital payments and online transactions. Towards this end, a convenient, low-cost, easily accessible, prompt, secure and inclusive payments system that wins the trust of all consumer segments, is of paramount importance. 

As a starting point towards digital payments democratization and driving wider penetration levels amongst the consumers, it would be prudent to target small-ticket size transaction values that may be completed through mobile or non-mobile via swift and innovative digital solutions. At Simpl, through a single click and without the need of waiting for the OTP, customers can complete purchase transactions in a jiffy including payments as low as INR 100. 

 

 RBI hackathon: Searching Solutions to Enhance Security in Digital Payments

The hackathon organized by RBI, which aims to discover safer digital payment options, mentions the following segments where tech-solutions are invited:

• Simple non-mobile based digital payments offering that enables conversion of small-ticket cash transactions to digital routes
• Contextual retail payments that eliminate the physical act of payments while shopping in-store without the need for interaction between consumers and merchants
• Viable authentication alternatives to the present OTP and PIN-based mechanisms 
• Social media-driven monitoring tool towards early detection of payments fraud 

The RBI has indicated their preference for payments solutions in the key focus areas of consumer consent, fraud prevention, and improvement of security features. For example, under the commonly adopted OTP system, the fraud risk is aggravated due to the security code being received on the mobile phone as an SMS without being encrypted. Vulnerable customers with lower digital familiarity might be duped into sharing confidential OTP details and end up losing money. The presence of smart authentication measures that protect consumer interests is the need of the hour. 

 

Simpl’s tech edge

Simpl is committed to making the payments experience simple, safe, and secure for customers.  Through a mobile-first seamless authentication process, access to a consolidated bill across merchants and product categories with an interest-free credit period, customers can enjoy uninterrupted online shopping without any friction. 

Our heavy investment in ML tools, data analytics, and predictive technology has paid off, whereby eligible customers gain credit approval almost instantly. Further, Simpl is smoothly integrated with the merchant platforms at the checkout page itself, so the customer can conveniently complete the purchase transactions without being redirected to a third-party website. 

 

Tech transformation shaping the future of digital payments

Buy Now Pay Later is a reinvention of the age-old Khata system prevalent in India, into a digital avatar.  Further innovations that one can expect to witness in the coming days include wearable payment devices comprising smartwatches, wristbands etc, QR codes, Near Field Communication (NFC) enabled point of sale terminals, contactless payments with biometric authentication methods, API-sharing enabled plug and play payments, digital ledger enabled secure cross-border payments and beyond. 

India’s digital payments are poised to grow to US$700 billion by 2022. To sustain this growth, it is imperative that the fintech payments industry continuously innovates by deploying new-age technologies in the likes of AI, ML, IoT, blockchain technology, cloud-based payments, data analytics, etc towards realising safe and secure digital payments facilities for one and all.