Digital enablement of banking systems and revolutionary technological advancements have led to a paradigm shift in how financial transactions happen between parties.
Unlike the conventional transaction models, the new age solutions like contactless payments, and digital wallet solutions are phenomenal.
Fintech services benefit the users in quick turnaround of transactions, ease of payments, and makes the whole process of financial transactions simpler and easier for all the stakeholders using digital wallets and contactless payments.
Despite the launch of contactless payments taking place long back, still, the challenges are high in terms of penetration into the markets and how people have accepted contactless payments or digital wallet systems.
With increasing resilience among users and businesses about contactless payments and the evolving scope of digital wallets, today’s people do not have to carry their wallet cash or debit or credit cards.
Using smartphone devices, and downloading digital wallets, the public can make transactions in contactless form, and within seconds the transactions are getting completed.
While there are scores of positives happening in the usage of contactless payments or digital wallets, the crux is about the security for the mobile devices used for the transactions, or the online transaction security which is critical in the case of digital wallets.
Technically, contactless payments are about the customers using non-human intervention solutions powered by the technological process.
For instance, the debit or credit cards have the NFO (near field optimization) or other processes wherein the debit or credit cards are just tapped on the POS machines for making contactless payments.
In some scenarios wherein the transactions are taking place using the payment interface code or the wallet-ids linked to the mobile devices.
There are scores of benefits for the users of contactless payments. One is the ease of use, and secondly, contactless payments can help process transactions faster.
In crowded supermarkets or stores accepting contactless payments, customers can make use of digital wallets to make transactions.
Digital wallets are technically a replacement to the physical wallet to have some cash carried.
Conventional banking solutions might have limitations over the payment structures and charges etc.
But with the increasing demand for digital enablement of businesses, there are scores of e-business solutions developing mobile and web apps that offer digital wallet services.
Transferring the funds from the respective account to the digital wallets, and the currency in the wallet can be used for purchases made from the special digital wallet-related stores.
Or even in the case of some digital wallets, the solutions are available for adding currency and transacting across the marketplace businesses.
Risks Attributed to Contactless Payments and Digital Wallets
Contactless payments are used by millions of users, and alongside their ease of use, there is a significant level of risk integral to the usage of digital wallets or contactless payment solutions.
Firstly, the issues are pertinent to mobile security and data privacy risks.
In general, contactless payments like the NFO cards or the tap cards do not require PIN or passcodes to certain limits.
A phone without essential security features in place can lead to challenges such as the unauthorized use of payment cards without detection.
Hundreds of such cyber-attacks were reported for the contactless payments cycle.
Also, in some of the contactless payment options, the transactions take place without a receipt, and thus it can become complex for the owners to prove the fraudulent transactions.
1. Device and Network Vulnerability
Another critical aspect of contactless cards is the POS devices, fraudulent QR codes leading to complexities.
The RFID (radio frequency identification) solutions used for transmitting the data can be hacked by hackers, using skimmers or fake scanners.
In such conditions, the liability vests with the user. The IoT (the internet of Things) is the other major challenge.
When hackers can breach networks and devices, the scope for hacking contactless payment networks is easier.
2. Personal Data Security
Contactless payments and digital wallets were devised to secure the financial transaction models, and in the case of contactless payments and digital wallets, the scope of secured transactions is high.
But in general, these aspects like contactless payments and digital wallets are mobile based.
Therefore, the scope of data privacy is a major challenge. The service providers could gain access to immense amounts of data from users and can track them using such information.
As a result, the risk of security for data privacy becomes a major challenge, as smartphone devices could have an impact on malware attacks too.
Focusing on digital transformation, the scope of fintech like contactless payments and digital wallets, there are national laws and practices defined and in place to address the cybersecurity challenges.
In addition to public security solutions and options, one must focus on personal measures that can improve security.
Apple pay, the digital wallet, and the contactless payment option is a highly potential solution that is secured well, and the hardware integration structure is complex for any security breach.
In Apple pay, when a user makes a payment, the system uses a device-specific number and a unique kind of transaction code for processing the payments.
As a result, the card details are not stored on the devices, and the details do not get shared with any merchants.
If such measures are integral to the device security measures, they can help in mitigating the risks of cybersecurity and develop an internal system of security solutions to screen the devices.
Such security practices followed in Apple pay for its digital wallet and contactless payment options, help the users have more secure solutions in place for digital transactions.
For non-Apple devices, like Android devices, the inherent security options for device-level security are limited.
Hence, using cyber security and cyber protection solutions like Acronis Cyber protect can be resourceful in securing the devices to support enhanced security prospects of handling digital wallets and contactless payments.
For more information on Acronis cyber-protect, reach out to the Exabytes Singapore team. We are available on WhatsApp and Email.