The experiences of 2020 will accelerate innovation and force companies to learn from their mistakes to ensure they are not repeated in 2021
In parallel to this pandemic-stricken year in which time often seemed to stand still, businesses rapidly went digital and made structural changes to their payments operating models. Global economies moved quickly in ways that accelerated change, bringing lasting impact to consumer behavior, fraud patterns and risk mitigation needs.
Consumers adapted to new shopping behaviors and digital habits during the crisis. Looking ahead to next year, we believe many of the changes in digital payments will carry over. More importantly, the experiences of this year will accelerate innovation and force companies to learn from their mistakes to ensure they are not repeated in 2021.
A few predictions for the upcoming year include:
Small businesses to increase investments in cybersecurity as consumers shift to digital
The flight to digital by new consumers was noticed early on by businesses. As per a Deloitte report, 48 per cent of consumers reported that overall online spending had increased since the outbreak of Covid-19. These consumer behaviours will be instrumental for small businesses to innovate and meet customer expectations on security. Investments made by merchants in new strategies to onboard customers and new ways to pay, either online, in-app and contactless will be rewarded through new customer acquisitions, existing customer retention and growth in sales.
But as merchants and consumers move online, so are cyber criminals. Small businesses will need to update their fraud prevention strategies to support omnichannel commerce. A sure shot way is for small businesses to turn to reputable partners that can provide payment security aligned to their business goals and interests.
Combating risk & security in modern payment infrastructures
Advances in payment innovation between fintechs and established financial institutions have led to widescale adoption of digital payments. Businesses are opting out of or modernizing legacy payment infrastructure and quickly embracing new and faster ways to send money, settle payments and share information, also by relying on new players like fintechs. Real time payments, digital currency and open banking support innovation that match the expectations of digitally savvy businesses and will subsequently drive digital commerce for decades to come. Thus it is critical for businesses to be mindful of data privacy of customers and the principles of open banking by sharing data ethically and correctly across all their functions.
Fintech and financial institutions need to have improved mechanisms to spot potential and atypical fraud activities. 2021 will be crucial for growth in volume of real time payments, industry discussions on customer protection and data privacy will be at the forefront and industry players working together to resolve new vulnerabilities as they are revealed.
Strong customer authentication to become important
Digitization of financial transactions continues to gather pace in India. However, critical challenges in mitigating cyber-security risks have risen too, with the growing number of new-to-digital consumers. To safeguard themselves from cyber vulnerabilities, consumers are moving away from passwords and adopting stronger customer authentication standards across all their digital devices while making payments, etc.
According to World Economic Forum’s Global Risks Report 2020, data theft is one of the top risks that businesses are likely to face in the long term. Accelerated by Covid-19, demand for solutions that help businesses to digitally verify consumer identity will grow. Reviewing and further strengthening the existing compliance and regulatory framework by the regulator during these transformative times will become even more important. The concept that digital identity is one of the building blocks required for an economy to function in the digital age will gain further traction in 2021.
Increase in role of artificial intelligence (AI) and machine learning (ML) as new-to-digital consumers abound
Digital experiences continue to become mainstream, more so with the pandemic providing a fillip. The world financial system is moving closer to a digital, cashless future and with a rise in online consumption, 2021 will witness a surge in a new generation of digital customers.
Visa has been using AI since the 1990s as part of its mission to make payments safer and easier.
When an attempted payment is initiated at a merchant, Visa’s Advanced Authorisation uses AI technology to analyze more than 500 risk attributes in approximately a millisecond and produce a score that reflects how risky the transaction is. The goal is to help financial institutions decide whether to authorize or decline a given transaction and at the same time create more confidence among consumers in digital payments. This use of AI is helping companies around the world improve customer experience, drive business growth and mitigate the threats to payment security.
To provide a secure payment experience while monitoring an exponential increase in transactions, we believe that more and more financial service providers will build new payment security solutions applying technologies such as AI and ML to automate risk detection. In the recent past, such technologies were vital in creating payment security solutions such as EMV 3DS, tokenization and deployment of many capabilities to strengthen real-time payment fraud monitoring. AI and ML will be instrumental in preventing payment risks in this time of increasing cybersecurity risks.
The author is Chief Risk Officer, India & South Asia, Visa
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